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COPYRIGHT DEPOSIT. 



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Meaning of 
Property 



Isaac H. Lionberger, chairman 

AMERICAN CREDIT-INDEMNITY 
COMPANY 



Copyrighted 1919 

by 

Isaac H. Lionberger 

of St. Louis 



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Meaning of 
Property 



Isaac H. Lionberger, chairman 

AMERICAN CREDIT-INDEMNITY 
COMPANY 



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"If in some things I dissent from others 
whose wit, industry and judgment I look up at 
and admire, let me not therefore hear presently 
of ingratitude and rashness; for I thank those 
who have taught me, and will ever; but yet dare 
not think the scope of their labor and inquiry 
was to envy posterity what it could add and 
find out." 

"I do not desire to be equal to those that 
went before, but to have my reasons examined 
with theirs and so much to be given to them as 
they shall deserve. I will have no man addict 
himself to me, but if I say anything right, defend 
it as truth — non mihi cedendum sed veritati." 

— Ben Jonson. 



CONTENTS. 



1. 


Introductory. 


2. 


Work and wealth. 


3. 


Communism. 


4. 


Industrial freedom. 


5. 


Analysis of present system. 


6. 


Distribution of tasks. 


7. 


Efficiency in production. 


8. 


Distribution of goods. 


9. 


Function of property. 


10. 


Inequality. 


11. 


Objections urged against property 


12. 


Wages, profit, interest. 


13. 


Great wealth. 


14. 


Folly of efforts to destroy. 


15. 


Trade unions. 


16. 


Masters' combinations. 


17. 


Protection. 


18. 


Taxes. 


19. 


Conclusion. 



INTRODUCTORY 

Property is a natural or artificial institution, 
as we choose to judge of it. Those of us who 
approve of it rather admit than attempt to 
justify its sanctity. Having it and content with 
its possession, we incline to regard with a certain 
scorn the complaints of those who question the 
justice of a blessing in which they do not share. 
Yet it is unwise to ignore the challenge of dis- 
content. The church employs its preachers; 
every political party its advocates; the law must 
be vindicated over and over again from day to 
day and generation to generation, for what is 
not understood cannot survive. A hereditary 
monarchy was for many centuries a sacred institu- 
tion and no man dared to question the Divine 
Right of kings. Yet today, notwithstanding its 
distinct and visible utility, its many brilliant and 
useful achievements and the confusions and dis- 
orders which it precludes, the institution is being 
dissolved by the inconsiderate suspicions of those 
who cannot understand its usefulness, who do 
not perceive that democracy is a confused and 
disturbed society and that none but a very 
intelligent people, practiced in self-restraint, can 
by ballot choose one to rule over all the rest. 
A king is an idea, indispensable to those who are 
used to it and cherish it. It stands for order 
and peace, avoids frequent elections and party 

[ 7 ] 



INTRODUCTORY 

strife and constant uneasiness, precludes corrup- 
tion and intimidation and admits of the transi- 
tion of power from faction to faction without the 
horrors of revolution. Because the hereditary 
principle is most useful and convenient, many 
wise people support it, however foolish it may 
seem to the unthoughtful. 

Property is harder to vindicate than the insti- 
tution of kingship. Its utility is not so obvious 
to the average man. It is produced by the co- 
operation of all, yet one has more and another 
less. Who can justify the millionaire to the 
pauper? Upon what principle does wealth rest? 
There are no trained advocates to answer this 
question, yet it must be answered and so an- 
swered as to leave no doubt in any honest mind. 
Political power has passed to the majority and 
with it the right to tax, and with the right to 
tax, the power to confiscate. Men who cannot 
perceive the righteousness of another's prosperity 
are apt to hate it and attempt to destroy it. A 
majority in every democracy is composed of men 
of moderate means or none. Great wealth is 
therefore odious to them. A new instrument has 
recently been put into their hands. An income 
tax is an unequal tax; it does not touch the 
majority. That such a tax will be used to re- 
store a plausible and specious equality no man 

I 8 ] 



INTRODUCTORY 

can doubt who observes the growing burdens put 
upon the rich. We believe vaguely in equality. 
The dim generalities of the Declaration of Inde- 
pendence have long been taught in the schools, 
and as that instrument declares that men are 
born equal, we think they should be so. Yet 
we can nowhere perceive equality. Some are 
rich and some poor, some masters and some 
servants. It will not do to say that men are 
equal under such circumstances, nor can we 
justify inequality by affirming that many are 
foolish and some wise, some good and many bad. 
The majority is not as well off as the minority, 
and an argument predicated upon the inferiority 
of the majority will never find acceptance among 
a turbulent and free people. 

To justify private property and its unequal 
distribution, we must resort to other arguments. 
We must show why and how inequality is indis- 
pensable to the general welfare — to the poor as 
well as to the rich; and must prove not only the 
private value and general utility of property, 
but make it evident that like every other con- 
ventional institution, it is the servant and not 
the master of men. We must allay the discontent 
which we now observe by showing that property 
is not the cause of the evils complained of, but 
that these evils result from other influences, 

[ 9 ] 



WEALTH AND WORK 

which private property tends to mitigate; and 
demonstrate clearly upon what considerations it 
rests, what evils it mitigates, what general good 
it accomplishes and why one should have more 
and another less. These are the problems which 
confront us. 

If we begin at the beginning and affirm what 
no man is likely to deny, namely that goods are 
indispensable to the general welfare, — and I mean 
by goods all those wares and commodities which 
conduce to the comfort and happiness of men, — 
and leave aside for the moment all notions of 
property, we are brought face to face with the 
question, how shall these goods be provided? 
They are not natural in the sense that nature 
produces them ready for man's enjoyment. Sav- 
ages may flourish upon the spontaneous offerings 
of nature, but the civilized man cannot pluck 
food from an uncultivated field nor clothe him- 
self with the leaves of the forest; he must work 
in order to live. The wealth we moderns need is 
artificial wealth and must be produced by labor. 

Starting with this valid assumption, we are 
confronted with the real problem of industry, 
namely, how shall we labor? Should each be 
left to his own resources and be dependent upon 
himself, or should we resort to some contrived 

[ 10 ] 



ORGANIZATION OF INDUSTRY 

scheme of cooperation wherein each shall be set 
to perform that sort of labor for which he is 
best fitted? The latter plan seems not only 
more rational, but more generous. It is rational 
because it sets before each a task suited to his 
capacity, and it is generous because the special 
capacity of each is enabled to promote the wel- 
fare of all. Let us therefore first discuss this 
plan, which for convenience' sake we will call 
communism. It is unnecessary to define the 
word. If we leave aside all nice discriminations 
which are likely to confuse, communism may be 
regarded as that scheme of cooperation which 
exacts from every individual the sort of pro- 
ductive labor for which he is best fitted, in order 
that a common wealth may be produced as 
efficiently as possible. 

Before we approve such a scheme, we should 
take into consideration various of its essential 
elements which cannot be ignored. Its purpose 
is to produce wealth of all sorts in abundance. 
In order however to accomplish this object, we 
must know what sort of wealth to produce, and 
to this end be acquainted with all the wants of 
the community, devise some plan whereby every 
legitimate want may be satisfied with least in- 
convenience, and at the same time discover, and 
in some manner choose from among the millions 

[ 11 1 



COMMUNISM 

of men concerned, the special masters or directors 
who are competent to judge of the capacities and 
needs of the community; so that every man may 
have his appointed task and each his just reward. 
Such overseers are indispensable, for if every man 
be free to select his own task and take from the 
general store whatever he wants, confusion will 
be inevitable. If I work for myself, I will know 
what to do, but if I work for all the rest, I must 
be told what to do. In order that I may have 
what I want from the general stock, that which 
I need must be put within my reach somehow. 
These difficulties are not inconsiderable. 

A great nation composed of millions of men 
cannot conveniently choose from so many those 
whose special aptitudes fit them for the delicate 
tasks so to be imposed upon them. The masters 
selected will have great power as well as great 
responsibility. They must be both wise and just, 
for if they blunder the whole scheme will fall 
into confusion. Moreover, there is a limit to the 
best human capacity. No man can know the 
peculiarities, abilities and needs of even a thou- 
sand of his fellow-citizens. We must therefore 
appoint not one but many masters, as many in 
fact as a hundred millions of people need. There 
is in an army an officer for every ten or twenty 
privates. Shall we appoint so many? If so, we 

[ 12 ] 



COMMUNISM 

shall have over the many millions concerned 
millions of masters each of whom will have with 
respect to his fellows an arbitrary power more 
considerable than that required for the manage- 
ment of troops; for the civil master must not 
only have power to make another do that which 
is requisite for the general good but he must be 
a judge of that good and of the fitness of every 
man whom he controls for each task assigned. 
He must moreover be acquainted with the wants 
of all under his charge and see to it that each 
appropriates what he ought to have and no more. 
He must indeed be equal to an even more delicate 
responsibility. All tasks are not alike; some are 
pleasant and others disagreeable, some hard and 
some easy. These tasks must be justly appor- 
tioned, and from day to day, so that none shall 
have a grievance. 

If notwithstanding all of these difficulties, we 
do manage somehow to divide the population 
into convenient groups and to set over each a 
master competent to compel what is requisite for 
the welfare of those composing it, there will 
remain another difficulty which ingenuity may 
find it hard to solve. Not every petty group 
can possess the natural resources upon which its 
prosperity must depend. We have farming com- 
munities and cities. Those who live in towns 



[ 13 i 



COMMUNISM 

need food; the inhabitants of the country require 
a multitude of articles made in the cities. How 
shall the various petty groups be induced to so 
cooperate as to produce in right quantity the 
articles of which the others have need? Will it 
be necessary to appoint, in addition to the 
corporals and sergeants mentioned, captains, 
majors and generals as well? Or should we 
first take a census and ascertain the number to 
be served, the needs of each, say so many pairs 
of shoes, so much clothing, so much food, so 
many houses, etc., and then divide the popula- 
tion into convenient productive groups having 
in view the productive capacity of each and the 
wants of all? 

This latter plan has much to commend it. 
If we know that one hundred millions of people 
need three hundred million pairs of shoes each 
year, nothing should be easier than to establish 
factories having the requisite capacity; set so 
many to the raising of cattle, so many to making 
leather, etc. The plan is not however so simple 
as it seems, for the cattle must be assembled and 
killed, the material for tanning must be provided 
from various parts of the country, the leather 
must be forwarded to the factories and the shoes 
delivered to the consumer. In order to accom- 
plish all of these tasks satisfactorily, the shoe- 

[ 14 ] 



COMMUNISM 

master must control or have some authority over 
the grazing lands, the ploughed fields, the forests, 
and also over the transportation systems which 
he must employ; and so must every other master 
of every other industry. How shall all of these 
masters be reconciled? If we needed shoes and 
nothing else, the problem should be simple 
enough; but we have a thousand needs. Can a 
thousand masters independently control all of 
the various means, materials and instrumentali- 
ties upon which each must depend? If they can- 
not, how can their conflicts be reconciled? If one 
chooses this man to make shoes and another 
thinks him fitter for making cloth, which shall 
command his energy? Moreover, in the event, 
— and such an event is not improbable, — it 
transpires that after the requisite labor has been 
set to the production of shoes, there is not 
enough for other commodities, how shall this 
trouble be overcome? We need say ten com- 
modities but six only can be produced: which 
shall we do without? Who shall decide? 

These troubles incident to a communistic sys- 
tem are not fanciful, yet they are inconsiderable 
when we reflect upon the restraints which such 
a system necessarily involves. Masters perhaps 
will flourish, but what of the men? They must 
do this or that as they are told. If they refuse 

[ 15 ] 



COMMUNISM 

they must be punished, else the whole plan fails. 
Will they be free or slaves? If slaves, will they 
be apt to work with energy? If for example I 
dislike my appointed job and prefer literature to 
brick-laying, how and to whom shall I show my 
fitness for one task and unfitness for the other; 
what tribunal will decide, where the principles 
involved are so delicate, intangible and perplex- 
ing as those which affect the merit of a literary 
performance or the capacity of an artist? If the 
tribunal decide against me, must I continue to 
lay bricks, and if I must, will I be apt to lay 
them well or ill, zealously or peevishly? 

We must consider also another necessary inci- 
dent of the communistic scheme no less ominous. 
Not only will labor be enforced but the wages 
received for it will depend upon many delicate, 
accidental and capricious influences which may 
seriously affect the welfare of all workers. Com- 
munism assumes that the needs of a people can 
be ascertained by some body of officials and that 
what they deem an adequate supply of goods 
will in fact be satisfactory to all men, however 
they may differ. If the Bureau think we should 
be content with so many shoes, so much clothing 
and food, such and such living quarters, will all 
of us gladly acquiesce? Will we be content to 
live not only as another shall dictate, but where 

l 16 ] 



COMMUNISM 

he shall appoint? These are very grave con- 
siderations and we may well doubt the wisdom 
of any scheme which involves them. Few men 
will be content to get rid of private property in 
order to substitute for it universal slavery; yet 
if we must have a common property we must 
resort to compulsory labor, to a directed and 
controlled industry, to an arbitrary distribution 
of goods, to limited gratifications, to a set wage, 
to a predetermined and arbitrary mode and 
place of living, and to the tyranny of a thousand 
masters elected by lot, unknown and untried. 

If, bearing in mind these manifest consequences 
of a common property and enforced cooperation, 
we turn aside and attempt to conjecture a more 
comfortable, less complicated and more liberal 
plan of living, what sort of scheme should we 
devise? What we need is an abundant produc- 
tion and just distribution of all the goods which 
contribute to the comfort or happiness of millions 
of individuals differing in capacity, taste, inclina- 
tion and energy; who, having various wants and 
various aspirations, wish to be free to do and 
live as they please and where they like; and 
because they resent another's tyranny, should be 
willing to allow a like freedom to their fellow- 
men. These are the essentials of any plan which 
is likely to be approved by the common opinion 

l 17 ] 



UTOPIA 

of reasonable people at this day. How and by 
whom shall such a plan be devised ? Who among 
us is competent for so great an undertaking? 
What human faculty can conceive the wants and 
idiosyncrasies of the millions of his fellow-citizens 
and show to each how he may accomplish his 
desires? The world has produced many great 
men, yet since the beginning none has been equal 
to such a task. Plato wrote his Republic 
twenty-five hundred years ago; the Greeks were 
a great and ingenious people, yet at no time, 
under any government free or tyrannous, did 
they venture to make trial of the beautiful but 
visionary scheme of their great philosopher. 
More devised a Utopia for the England of 
Henry VIII's time, yet neither his contempora- 
ries nor posterity thought fit to try or even con- 
sider his dream. A man may seem ever so wise, 
but few of us can be brought to believe that 
another is wise enough to guide the industries 
and control the destinies of all of his fellow- 
men. Upon what then must we rely? How can 
we accomplish that which we desire? 

Perhaps a task which is beyond the capacity 
of any individual, may be within the reach of 
the common sense of mankind guided by experi- 
ment and instructed by experience. The race is 
old; it has tried many experiments; it has had a 

I 18 ] 



COMMON SENSE 

very various experience and after many thou- 
sands of years we have the results of its instruc- 
tion embodied in the conventional institutions 
which surround us. The world began with 
savagery and has achieved what we call civiliza- 
tion—not suddenly, but gradually. It tried an 
enforced cooperation, a common property, over 
and over again. Its slow progress has been away 
from such expedients to the free system which 
we now observe. 

Let us examine this system and try to under- 
stand its origin and the forces by which it is 
guided and controlled. If we regard it historic- 
ally, it seems to have been the result of influ- 
ences which began to operate after the dissolu- 
tion of the feudal system. The dark ages follow- 
ing the downfall of the Roman Empire were dis- 
turbed by incessant conflict. Some sort of law, 
some compelling authority was required for 
peace. Groups of men found such law and 
authority under one whom they first called chief 
and then king, and they obeyed his will in order 
to avoid anarchy. Such rulers used their author- 
ity for the general welfare and forced some to 
fight and some to till the gound and some to 
forge armor. Tasks at first arbitrarily distributed 
tended after a time to fall to those fit for them, 
and so a variety of occupations resulted from 

[ 19 ] 



EVOLUTION OF INDUSTRY 

compelling influences. Society however was 
organized for war and not for peace, for safety 
and not for prosperity; and so remained for a 
long time. 

When by reason of the spread of order and 
the gradual consolidation of kingdoms, wars 
became less frequent, the restraints which inces- 
sant conflict necessarily involved were gradually 
relaxed and the arbitrary and vague services of 
feudalism were commuted into fixed rents or 
taxes. For centuries all workers had been slaves. 
What one sowed, another reaped; none had a 
motive to zealous industry; all that a man pro- 
duced in excess of what was necessary for his 
own livelihood was appropriated by the lord. 
As soon as a limit was set to such exactions and 
men were permitted to appropriate and own the 
excess, industry began to revive. Men worked 
zealously because they had a motive to do so. 
Freed from the land, they wandered about in 
search of work and many of them found their 
way into the towns and became apprentices to 
various arts and crafts. As the products of 
labor multiplied, trade became active and mar- 
kets were established where the goods and wares 
made in the towns were exchanged for food and 
raw material; and at these markets were re- 
vealed the various needs of those who mingled 

120 ] 



EVOLUTION OF INDUSTRY 

together; and so goods in demand were adver- 
tised and brought forward and men were induced 
to take up useful, profitable and various tasks. 
The slavish system which compelled the indi- 
vidual to do what another deemed necessary for 
the general welfare was succeeded by a free sys- 
tem which induced the right service by reward- 
ing it. So great a revolution was not however 
suddenly accomplished. For centuries the laws 
interfered with its progress. Those in authority 
could not be brought to believe that men could 
be safely emancipated from their superintending 
care. Wages and prices were fixed, trade was 
regulated and restricted, monopolies were granted 
to encourage special industries, and all sorts of 
petty, vexatious and injurious restraints were 
imposed upon the makers and distributors of 
goods. Only after a long time, and rather as the 
result of the stress than of the instruction of 
experience, did industry become emancipated and 
take on that free yet dependent character which 
we now observe. 

The industrial no less than the political organi- 
zation of society has therefore been the result of 
vigorous and constantly operating influences 
which in the course of a long time led men away 
from primitive tyranny to the comparative lib- 
erty with which we are now blessed. We began 

[21 ] 



FREE SYSTEM 

with communism and have achieved a voluntary- 
cooperation which if it be not absolutely free, 
yet is more free and unrestrained than any sys- 
tem which has preceded it. If this be true, is 
it foolish to conclude that the common sense of 
mankind, fortified by the instruction of centuries, 
has rejected communism and approved a freer 
and more comfortable system? And ought we 
not rather to defer to this common sense, so 
fortified, than to trust ourselves to the untried 
and perhaps foolish dream of the theoretical 
philosopher? Society has never been foolish 
collectively. Somehow it has managed to survive 
all sorts of vicissitudes and all sorts of trials, 
and in spite of them to achieve a slow but visible 
progress from anarchy to regulated liberty — 
from poverty to relative affluence. That it has 
achieved so much should induce us to give to 
existing institutions at least a candid and re- 
spectful consideration and prevent us from con- 
demning them without a hearing. Perhaps our 
industrial system is not as hateful as it seems. 

By comparing it with communism, we discover 
that however imperfect it may be, it is at least 
free from many of the evils which necessarily 
result from communism. Men are free to do 
what they please and to live where they please, 
in the sense that they are not compelled to do 

[22 ] 



FREE SYSTEM 

what and live where a master shall require. 
They are not only free to choose their work but 
to choose their gratifications. What they make 
they may spend as, when and where they please 
and not as another shall direct. These advan- 
tages are not inconsiderable. Freedom is worth 
something of itself. It is preferable to tyranny 
even if it result in sacrifices, yet it seems to 
involve none, for never before were men so 
prosperous. They were poor under feudalism; 
communism tended to keep them so. They 
began to prosper as soon as they became emanci- 
pated. Today they are better off than ever 
before. These facts invite our consideration. 
Whatever defects may be found in our present 
industrial system — and I frankly admit that it 
is not perfect — it is yet free from many, very 
many evils which communism involves; and it 
has not made us poorer, but richer. Let us 
therefore try to understand it. 

In order to do so, it is necessary to confine 
one's attention to the subject and not permit it 
to stray into less fertile but more pleasant fields. 
Industry concerns itself with the production and 
distribution of wealth. Its object is not moral 
but economic. It does not ignore, but it cannot 
be guided by those benevolent and most worthy 
motives of private conduct which result in 

123 i 



FREE SYSTEM 

liberality and charity. Concerned with business 
and with business only, with the production, 
not the benevolent use of wealth, with what 
men do in order to live and thrive, and not with 
what they ought to do in order that others may 
not suffer; it leaves charity to religion and the 
nobler impulses of men, and contents itself with 
providing the means whereby those impulses may 
be gratified. 

If we keep constantly in view this essential 
difference between philanthropy and industry, 
many of the irritating suggestions of irrelevant 
criticism will fall by the way and we shall per- 
ceive and appreciate the admirable methods 
whereby a reasoning people in the course of a 
long time has managed to bring about the 
closest harmony between private selfishness and 
general welfare. 

Let us now look about without prejudice. What 
do we observe? The world is very busy. Men 
move to and fro incessantly, each intent on his 
own affairs. A vast majority of them find work 
to do which seems to be satisfactory. They 
differ in character and in capacity and perform 
various labors. Somehow they have managed to 
divide themselves into convenient economic 
groups. We have farmers and millers, miners 
and blacksmiths, tanners and shoemakers, 

t 24 ] 



SPONTANEOUS SPECIALIZATION 

merchants and carriers, bankers and brokers; and 
each group seems to contain just the right num- 
ber, no more, no less. We have also markets 
and exchanges where we get what we need and 
dispose of what we have. Somehow the right 
goods are brought forward in the right quantities 
and no want of a luxurious people can long 
remain unsatisfied. Everybody seems to be 
intent on his own affairs; yet if we look more 
closely we shall observe that each works for 
somebody else. No one makes goods for his own 
use: what he makes he sells, what he needs he 
buys. We serve each other not because we 
must but because we choose to do so, yet in 
the exchange of services we seem to seek not 
another's but our own advantage. If we serve, 
we serve for pay; if we sell, we sell for profit. 
Yet no harm seems to result. By cooperation 
everybody seems to realize some advantage for 
himself as well as for others. Lacking direction 
of an official sort, we nevertheless spontaneously 
accomplish all that a compelled cooperation, 
cunningly contrived and rigorously enforced, 
could accomplish. Being free, we are yet mutu- 
ally dependent. We thrive together and languish 
together. No class prospers at the expense of 
the other; each shares in the prosperity of the 
other. If we have large crops, the prosperity of 



( 25 ] 



SELFISHNESS AND INDUSTRY 

the farmer is shared by every other group; when 
the factories thrive, the miner flourishes. Some- 
how, in spite of what seems to be an industrial 
anarchy, we manage to live together, to work 
together and to serve each other zealously and 
efficiently; and such irregular, spontaneous, un- 
directed cooperation seems to have resulted in 
greater comfort and happiness than was ever 
before known by mankind. These are the facts 
which confront us. To understand them is 
worth an effort. 

The most remarkable feature of this free sys- 
tem is that while it seems purely selfish it is 
always cooperative or altruistic. We must first 
understand this anomaly. 

The explanation is obvious if we consider the 
motives and influences by which this free system 
is guided and controlled. It rests as should 
every human institution, on human nature; not 
of one man, not of a governing class, but of the 
average man, his motives, weaknesses, propensi- 
ties, needs and capacities. We may assume that 
this average man has wants and wishes to gratify 
them in the easiest way, and that his intelligence 
should prompt him to find that way in the 
course of time. We may also assume that by 
reason of the establishment of civil order he is 
not at liberty to pray upon his neighbors, as did 

[ 26 ] 



SELFISHNESS AND SERVICE , 

the feudal baron and his retainers, but must get 
by his own labor what he needs. Such a man, 
so situated, may adopt either of two courses: 
he may make all that he needs, as did his 
savage ancestors; or he may make one thing only 
and get what he needs by trade. Of the two, 
specialization and trade are to be preferred 
because practice tends to skill and skill to more 
and better goods, and trade to a satisfactory 
distribution of goods. In these advantages of 
specialization and trade is to be found the expla- 
nation of that spontaneous cooperation of free 
men which followed the relaxation of the feudal 
system. Every man got more for himself by 
working for others than he could get by working 
for himself alone. His motive was not benevo- 
lent: he did not set out to do good. He was 
induced to do good by the desire to help him- 
self; and having such a motive was compelled, 
in order to gratify his own wants, to make what 
another desired. His prosperity depended on the 
exchange value of his own goods: to get by 
exchange, he had to give in exchange something 
worth what he desired. In this manner the 
benefits of, or the increased production resulting 
from specialization, were realized. Such is un- 
doubtedly the explanation of that mutual ex- 
change of services or voluntary cooperation, 
which we have observed. 



[ 27 ] 



SELFISHNESS AND COMPETITION 

The motive which I have indicated not only 
induced men to do something useful to their 
fellows, but to do that which each could do best. 
An individual who selected a craft for which he 
was unfit, could not hope to compete in the 
goods market with another of greater capacity 
and equal industry. If for example, I must 
work ten hours in order to produce a certain 
article, and another can make it in half the 
time, he will be able to offer his product for less 
than I, and unless the market be broad enough 
for both, I must yield to him and go into some 
other business. In trade every man has a mo- 
tive to give as little as he can induce another to 
accept. He who gives more will therefore always 
be preferred to him who gives less. In the case 
put, I cannot give as much as my competitor 
and must devote my energies to some craft 
better suited to my capacity. The influence of 
competition is not to be deprecated but en- 
couraged. Society has many wants. Its pros- 
perity depends upon the ease with which it may 
gratify them. Every producer of goods is also 
a consumer. Where goods are easily produced 
by one man, and by another with difficulty, the 
former should be encouraged and the latter dis- 
couraged. We are apt to forget that in trade 
we exchange labor for labor; that the value of 

[ 28] 



SELFISHNESS AND PROSPERITY 

every man's labor depends on what he can get 
for it; and that what each can get for his own 
must depend upon another's efficiency. To 
decrease the labor cost of an article is to de- 
crease the market price, that is, the price which 
we must pay in labor for it. We therefore en- 
courage efficiency, and by the constant stress of 
competition induce free men to do that sort of 
work for which they are best fitted. 

Because these influences were constantly at 
work, the emancipation of labor did not result 
in anarchy. On the contrary free men devised 
under their guidance a better industrial organiza- 
tion than was ever before known: one that re- 
sulted not only in more goods of the right sort, 
but in their just distribution. Under it every 
man, however selfish he might be, had a motive 
to do his best. His share of the goods produced 
by all depended upon his own contribution to 
the general stock. 

To these influences and to freedom, we owe 
modern prosperity. Men have become zealous 
in each other's service. They have contrived 
ingenious machines which assist them in produc- 
tion and have formed themselves into competi- 
tive groups in order by a closer cooperation to 
obtain better results. In these groups specializa- 
tion has been carried very far. No one is now a 

[29 1 



PROPERTY 

shoe-maker. Each makes part of a shoe. One 
cuts leather, another sews, another heels, another 
finishes, and each has the assistance of a ma- 
chine. The result is astonishing. Where for- 
merly a man produced in a day one pair of 
shoes, today five men with the aid of machines 
produce not five pairs, but twenty or thirty 
pairs. So it is in every other industry. The 
factory has everywhere supplanted the crafts- 
man, and as a consequence the community has 
more goods than ever before. Every laborer 
produces more by and gets more for his labor. 
This is the explanation of the amazing progress 
of modern industry and of the ease with which 
we satisfy our wants. 

We now approach the subject with which we 
are chiefly concerned. What is the reward which 
has stimulated men to strive so zealously for the 
welfare of others? It is property. In property 
every man finds a recompense proportionate to 
his service. Rob him of this reward and the 
whole system crumbles. If he cannot possess 
and own what he makes, and freely exchange it 
for what another makes on terms satisfactory to 
both, he will not work save under the lash of 
compulsion. Liberty and property are justly 
associated, for without property liberty is fruit- 
less. Property lies at the very foundation of our 

I 30] 



PROPERTY 

political and industrial systems. It emancipates 
us from the lash of the overlord, affords a mo- 
tive and guide to industry, induces every man to 
do that sort of work for which he is fit, results 
in the abundant production at least cost of all 
the various articles of which society has need, 
and tends to that cordial and zealous mutual 
service which we now observe. So great is the 
importance of property that we have almost 
sanctified it. It seems a natural right. Christ 
praised the good and faithful servant who in- 
creased his own store by serving his fellows. 
Life, liberty and property are declared by our 
Declaration of Independence to be among the 
inalienable rights which governments are bound 
to protect. If I make a hoe it is mine by the 
common opinion of mankind. 

We allow private property even in land, not 
because the appropriation of a natural resource 
to the exclusive use of any man can be justified, 
but because as practical men we wish the land 
to be made as productive as possible. The 
farmer must somehow be induced to feed not 
only himself but the rest of the community. If 
we say to him, "You must sow what we will 
reap," he will not be zealous in the performance 
of so unprofitable a service. 

[31 ] 



OBJECTIONS TO PROPERTY 

Notwithstanding these considerations, men are 
constantly attacking property. They complain 
that it is unequally distributed; that one has less 
because another has more; that the rich man has 
appropriated more than he can earn, and that 
the poor are victims of spoliation. If these 
things be true, then all that has been said is 
false. Let us examine critically the arguments 
of these protestants. 

I assume that none of them is disposed to 
quarrel with the general proposition that men 
are and of right ought to be entitled to what 
they produce and should be allowed to exchange 
their own goods for goods produced by another. 
The evil complained of, if there be one, must 
lie elsewhere. It cannot be found in the mere 
fact that wealth is unequally distributed, for 
one man may be more industrious or skillful or 
saving than his neighbor, and if he produces 
more he should have more. The evolution of 
industry has resulted in many consequences and 
in these consequences we may find the germ of 
the general discontent. One of those conse- 
quences is the extreme to which we have pushed 
specialization. In order to make as much as 
possible with least effort, we have established 
factories and so distributed the various processes 
of manufacture that today no one makes a 

l 32 ] 



OBJECTIONS TO PROPERTY 

completed article: that is an article ready for the 
market. Everything made is the product of 
many workers and it is difficult to estimate the 
contribution of each to its market value. We 
now solve this difficulty in a rough way. Goods 
are made and disposed of and the proceeds are 
distributed among those concerned according to 
a rule which seems to be arbitrary and unjust, 
one receiving wages, another a salary, another 
interest, another profits. Fair men who do not 
quarrel with property as such, are dissatisfied 
with the manner in which it is distributed 
among those who cooperate to produce it. There 
are others who complain of trade and insist that 
it encourages cunning and rapacity, and results 
in the enrichment of one at the expense of an- 
other. Others quarrel with usury: money they 
say is inert and barren and produces nothing, 
yet it receives the lion's share. These and like 
prejudices are too widely diffused to be disre- 
garded. Moreover they are supported by facts 
which none can deny. Trade does sharpen the 
wits and some get rich by it while many fail. 
The capitalist may take his ease and live in 
luxury; the workman, who gets least, must toil 
incessantly. These consequences of our free and 
selfish system provoke resentment, and lie at the 
root of the discontent which now afflicts us. We 
cannot ignore them. 

[33 ] 



WAGES AND DISCONTENT 

The labor question is hard to understand. 
There are few principles to guide us. We can 
no longer measure the value of an individual's 
service. The old, simple way of ascertaining the 
value of work done by the goods it may be 
exchanged for in the market, is no longer avail- 
able. Where many cooperate to make and one 
sells and distributes the proceeds, it seems to lie 
in his power to give much or little as he pleases, 
and he has a motive to give little. The em- 
ployer is not altogether free, for he cannot force 
men to accept less than another will pay; but 
jobs are not easy to find, and a man trained to 
one craft cannot always find a vacancy in that 
craft. Moreover, a righteous employer who 
means to be just, cannot have his way. Every 
factory must compete with every other, and if 
one pays higher wages than another it cannot 
sell at the same price. Besides these causes of 
friction, there is the difference in men's capaci- 
ties: one is a better workman than another, yet 
both get the same pay. The cost of goods is 
predicated upon the whole output of the factory, 
and they are marketed wholesale. Discrimina- 
tion in wages is not only resisted by the Unions, 
but is excessively inconvenient. Employes are 
not associated in the management. However 
wisely and justly affairs may be managed, the 

I 34 ] 



WAGES AND PROFITS 

employe is never sure that he is getting his 
just share. These and like influences tend to 
discontent. 

I will not venture to offer a solution for prob- 
lems which practical men familiar with all the 
facts have tried in vain for centuries to unravel. 
A theoretical solution can have no value. The 
considerations involved are obvious enough, but 
are too complicated and confused to admit of 
definition. A factory is composed of building 
and equipment, proprietor or manager, and em- 
ployes. The fund to be distributed is the 
difference between the cost of goods, labor ex- 
cluded, and the price realized for them in the 
market, less the cost of distribution. Theoret- 
ically it should be easy to divide such fund into 
interest, profit, and wages, but such a division 
is never possible. Altho the rate of interest may 
be fixed, the employer and employe will never 
agree with respect to the division of the rest. 
Business affairs involve great risks. Times are 
not always prosperous. Upon the proprietor fall 
the losses; out of the fat years he must accumu- 
late enough for the lean. The success of the en- 
terprise depends in greater degree upon his 
ability than any other factor. He must know 
where, when and how to buy raw material, and 
where, when and how to sell the finished 

l 35 ] 



WAGES AND PROFITS 

product; what to make and how to make it; the 
cost of goods and their market value. It is hard 
to estimate the value of such capacity: there is 
no standard by which it may be gauged. 

Moreover, wages have a first lien on the 
enterprise. They must be paid whether earned 
or not. What part of the value of the output is 
due to the workman, what part to the efficiency 
of the machine with which he works or the 
peculiar market value of the commodity, it is 
hard to determine. Workmen are not of equal 
capacity: the man who makes a sewing machine 
does not deserve as much as the inventor. 
Such considerations obstruct the application of 
any theoretical rule for the distribution of 
profits, however plausible it may seem. Perhaps 
the following incident of the Russian revolution 
may serve to show how hard it is to estimate 
the value of managerial capacity. 

An American in charge of a factory which 
employed Russian workmen was called upon by 
a committee of the party momentarily in power 
and asked various details of his business; namely, 
what was his salary, how much he paid his 
workmen, etc. He replied that he received 
37,500 rubles a year, and paid on an average 
1000 rubles to his employees. He was thereupon 
informed that thereafter his salary should be 

l 36 i 



DIFFICULTY OF PROBLEM 

1000 rubles. When he refused to serve for such 
pay, he was seized by soldiers, forced into a 
wheelbarrow and trundled thro the streets behind 
a cryer who proclaimed that here was an Ameri- 
can who exacted for himself 37,500 rubles a year 
and paid his Russian employees only 1000. After 
being subjected to such danger and humiliation, 
he was released and discharged. Several weeks 
later the same committee called upon him and 
requested him to resume charge of the factory 
at his former salary, offering this remarkable 
explanation: ' 'Something has gone wrong. 
Everybody has been busy, but we cannot manage 
to get any wages out of the concern." The 
American consented on condition that he should 
again be conducted thro the streets but with the 
proclamation that he was the American who 
had taught 2000 Russians how to earn 1000 
rubles a year. His request was granted. 

Many schemes have been tried which promise 
a reconciliation of employer and employee, but 
none has been successful under all circumstances. 
Piece work, profit sharing, bonus in proportion 
to output, however fair they may seem, and 
however well they may work in special instances, 
sometimes result in bitter failure. They must 
always fail where the wages so derived are less 
than those current, and they are apt to fail 

l 37 ] 



ECONOMIC LAWS 

wherever such wages are more, because a cus- 
tomary wage in time becomes a vested right, 
however it may be earned, and discontent can 
never be satisfied. That there are factories 
without discord is undoubtedly true, yet in every 
such instance we find the explanation in the 
special character of the employer and men asso- 
ciated. A persistent course of fair dealing, a 
generous desire to have men share in the pros- 
perity which they have helped to promote, a 
wise, flexible, adaptable policy founded upon 
good faith and guided by intelligence, are fruitful 
of good even tho they cannot achieve absolute 
justice. 

If, passing a problem which does not admit of 
merely scientific solution, we turn to a considera- 
tion of the general economic influences upon 
which both wages and profits depend, we enter 
upon a more fruitful field and may perhaps dis- 
cover something which shall tend to reassure the 
doubtful and calm resentment. The factory is 
now the unit of production. It has taken the 
place of the craftsman. As a unit it is controlled 
by the laws which formerly controlled the indi- 
vidual. It is a specialist. Its prosperity depends 
upon the exchange value of the goods it pro- 
duces. It must make what the community 
needs and offer its goods in competition with 

[ 38J 



ECONOMIC INFLUENCES 

every other engaged in like industry. If it is 
inefficient, it cannot survive. It sells for the 
highest price and offers the lowest. Its object 
is to make cheap and sell dear. Its welfare 
depends first upon its own efficiency, that is 
upon what it offers; second, upon the efficiency 
of every other industry, that is upon the pur- 
chasing power of its own goods. When great 
progress is made in the art of shoe-making and 
none in the weaving of cloth, the purchasing 
power of shoes measured in cloth will be less 
than if both crafts had been improved. The 
economic laws which compel efficiency in one 
industry are beneficial in the highest degree to 
every other. Competition should be encouraged; 
none should resent its influence: the prosperity 
of all depends upon it. Abundant goods are 
cheap goods; scarce goods are dear goods. Wages 
and profits depend upon the common stock of 
goods produced by all industries. In order to 
derive much from this stock, much must be 
contributed to it. Wages cannot be fixed by the 
employer. He can not pay more and he cannot 
pay less than the average rate earned, and that 
rate depends upon the average product of all 
the laborers engaged in industry. Wages rise 
when factories and business are most active; 
they fall when business declines. They are 

139 ] 



WAGES MUST BE EARNED 

highest when most is produced and lowest when 
production is curtailed. Profits are highest when 
wages are highest. These facts are too well es- 
tablished to require proof. 

From them is to be inferred another fact which 
disposes of the current error now under con- 
sideration. The employer does not pay wages: 
they are earned by the laborer. High wages 
cannot impair the prosperity of the employer, 
always provided they are earned, because they 
do not come out of his pocket. Mr. Ford taught 
us this lesson. His minimum wage was twice 
the average, but he saw to it that the minimum 
was earned. He would have no bad workmen 
about him. He made more for himself by 
paying more to his workmen than any other 
factory. His genius assisted their industry, and 
their zeal his welfare. The machine which he 
provided was the best friend of the worker, 
because it enabled him to produce much by his 
labor. Mr. Ford knew how to so organize and 
equip his establishment as to make it the most 
efficient plant of its kind and his workmen the 
most zealous. Neither thrived at the expense 
of the other. Mr. Ford's millions represent not 
harm done but good — good to his associates, good 
to his employes and good to the community. 
Profits do not come out of wages. 

I 40 ] 



SCAMP WORK 

Nothing is more injurious to the community 
and to those who compose it than scamp work 
and restricted output. They tend to lower 
wages which zeal and efficiency tend to raise. 
Where the prosperity of the whole community 
depends upon the amount of wealth produced by 
all, everybody should strive to produce as much 
as possible, for his share will be great or small 
as the common stock is great or small. What 
each appropriates, he must create or get by fair 
exchange. He must offer goods for goods. His 
enrichment does not involve another's impover- 
ishment. He cannot get something for nothing. 
If we look about us and compare the economic 
condition of various peoples, we shall find that 
wealth and wages depend upon the same influ- 
ences and advance together. A country fertile 
and rich in natural resources is not necessarily 
prosperous. That country thrives, all other 
things being equal, whose industry is equipped 
with best machines and whose population is 
most intelligent and most industrious. Wages 
are highest and fortunes are at the same time 
greatest in America, because it contains the 
most ingenious and industrious people in the 
world. It produces most goods and has most 
to distribute. What it pays in wages does not 
diminish profits, and profits do not diminish 

[ 41 ] 



MUTUAL DEPENDENCE 

wages. No one can controvert these facts. 
They prove that the spoliation complained of is 
fanciful. No man has ever got rich by paying 
low wages. A prosperous factory pays higher 
wages than another. If special occasion for fric- 
tion between employer and employe arises, it 
should be met wisely and not by violence: with 
understanding of the factors and laws upon which 
the prosperity of both depend, and a wish to 
promote a common welfare by a just accommo- 
dation. The trend of wages should be always 
upward, because the efficiency of factories is 
constantly increasing. Today the machinist com- 
mands the energy of ten men; and his product 
being greater he should receive more than for- 
merly. Hereafter, with the progress of the arts, 
he should receive still more. Sufficient goods 
can now be produced to enrich every member of 
the community, and if all classes would set 
themselves to zealous work and mutual fair 
dealing, discontent should vanish. No man 
should complain of another's prosperity, because 
that prosperity rightly understood is proof of 
services rendered and property earned. 

A less difficult question is involved in the 
notion that trade results in the enrichment of 
one trader at the expense of another. It is hard 
to understand the origin and persistence of this 

[ 42 ] 



TRADE 

delusion, yet it is widespread and lies at the 
foundation of much of that prejudice against 
private fortunes which we are now considering. 
Rich men themselves share in the delusion. No 
merchant treats a seller of goods with that 
cordiality which he shows the buyer. He sub- 
consciously assumes that he will make money 
out of the buyer and cannot make money out 
of the seller. He always means to give in trade 
less than he gets; to buy cheap and sell dear; 
and because he realizes his profits only after 
having sold, he thinks they are derived from 
selling. Nations are obsessed by the same 
delusion. The United States protects its subjects 
against foreign selling. Its statesmen and its 
men of business are afraid of what they call an 
adverse balance of trade, not because it can be 
an evil to have an income in excess of an outgo, 
but because they think it advantageous to sell 
more than they buy. 

If we search for the origin of this blunder, we 
shall discover that it is almost as old as human 
society. The foreign policies of all nations were for 
centuries jealously, exclusively and in the highest 
degree injurious to themselves. The mercantile 
systems of the seventeenth and eighteenth 
centuries were built upon a philosophy which 
few had the wit to evade. Those systems rested 

143 ] 



SELLING AND BUYING 

upon the assumption that money was the most 
desirable sort of wealth, and this assumption 
proceeded from the fact that prosperity could 
be measured only in money. A trade which 
involved the export of money was therefore 
deemed injurious. The average merchant of 
today shares in the error which dictated the old 
policies. When money is coming in he knows 
that he is getting better off, and when it is 
going out he thinks he is getting worse off. He 
reckons his profits in money, and as those profits 
are derived immediately from the buyer, he 
assumes that they are realized at the expense of 
the buyer. As all men are buyers of goods, they 
regard with suspicion those who inflict an 
assumed injury by selling. People generally sus- 
pect the rich man whose fortune is derived from 
trade. Poor men and dreamers are constantly 
proclaiming against the iniquity of such ill got 
wealth. We must understand trade in order to 
dispel this illusion. 

Trade is an incident of specialization. Where 
no one uses or consumes what he makes, each 
must resort to trade to gratify his wants. At 
first goods were bartered or exchanged for goods. 
It is obvious that in barter neither party is 
buyer or seller: each is both. If he makes in 
one character, he must lose in the other, — and so 

[ 44 1 



PROFIT AND TRADE 

is no better or worse off as the mere result of 
the exchange. One, of course, may give a greater 
value than he gets, but such a result is never 
contemplated by the other. Each thinks he 
gets an advantage, for the exchange is always 
made on satisfactory terms. If I say that each 
does derive an advantage, yet neither derives it 
at the expense of the other, I will be deemed to 
have uttered an absurdity — yet the paradox is 
susceptible of positive and satisfactory proof. 

It ought to be evident that the mere exchange 
of one commodity for another cannot increase 
or decrease the value of either. Where shoes are 
worth as much, — that is, cost as much in labor, 
— as hats, the cobbler and hatter after trading 
will have as much in value as each had before, 
no more, no less: but, — and this is the explana- 
tion of the anomaly, — each will have what he 
wants and to this extent each will have derived 
a distinct advantage from the other — not at his 
expense however, for both are benefited. 

Now let us assume that the parties use money 
and buy and sell instead of bartering goods. 
Each starts with say five dollars and goods of 
equal value, and each buys from the other what 
he needs for five dollars. Is it not obvious that 
after such dealing each will have precisely what 
he would have had if he had bartered or 

[ 45 i 



PROFIT AND TRADE 

exchanged one commodity for the other? The 
reader need not be annoyed if he accepts with 
reluctance so plain a demonstration. Lincoln 
seems to have been unable to perceive it. He 
is reported to have said, "If I buy from an 
American an American hat for five dollars, 
America retains the money and the hat; but if 
I buy a hat from an Englishman, England will 
have the money and America the hat only." 
The implication is irresistible that we lose money 
by buying from a foreigner, yet it is false and 
misleading. In the one case, America started 
with five dollars and a hat, and after the pur- 
chase had been effected, still had the hat and 
the money. In the other case, she had five 
dollars but no hat, and after trading, a hat 
worth five dollars. 

We are beguiled by the immediate conse- 
quences of selling and forget that we sell in 
order to buy. No trade can be complete until 
goods shall have been exchanged for goods. We 
do not now barter, because barter is inconven- 
ient. A pair of shoes may be worth more than 
a hat, and the difference must be adjusted. We 
use money because it facilitates trade, first 
bartering goods for money of equal value, and 
then money for goods; but our object is to get 
with the goods we produce the goods we need. 

[ 46 ] 



PROFIT AND TRADE 

It matters not therefore, so far as the benefits 
involved are concerned, whether we exchange 
goods for goods immediately or goods for money 
and then money for goods. That an unfair 
advantage is not designed may be inferred from 
the common use in trade of the word "bar-gain". 
I have stated a simple case in order that it 
may not confuse. Let us go further into the 
matter and assume that shoes are worth four 
dollars and hats five, and that they are ex- 
changed at these valuations. If each party 
starts with his commodity and five dollars, 
after trading the cobbler will have a hat and 
four dollars, and the hatter a pair of shoes and 
six dollars, but each will have in value pre- 
cisely what he started with, altho that value has 
assumed another form. The cobbler started with 
five dollars and a pair of shoes worth four dol- 
lars, or nine dollars in value; and after trading 
he had four dollars in cash and a hat worth 
five dollars, — that is, nine dollars in value. He 
has neither made nor lost in value, but he has 
what he wants, and this benefit was his object. 
The profits which seem to be derived from mere 
selling are delusive, for each party may derive 
from the same trade the same profit. For 
example, if I value shoes which cost me four 
dollars, at five, and sell to the hatter for five, I 

1 47 ] 



TRADE AND PROFIT 

seem to have made a profit of one dollar; but if 
the hatter values his hat, which cost four dol- 
lars, at five and sells it to me at five, he also 
has made a nominal profit of one dollar. 

Perhaps the problem will be simplified if we 
take a broader view of trade than is afforded by 
a single transaction. A diversified industry- 
engages say one hundred men in as many dis- 
tinct occupations, each of whom depends upon 
the rest for the gratification of his wants. In 
such case each must sell ninety-nine times and 
buy ninety-nine times. If every sale is made at 
a profit, every purchase must be made at a loss, 
for after it is all over the quantity of goods has 
been neither increased nor diminished. Each 
worker contributes one sort of goods and gets 
ninety-nine others of equal value. He gets out 
in value as much as he put in — no more, no less. 
The farmers of Kansas exchange wheat for vari- 
ous articles made in New England, and both 
sections are better off, but neither at the expense 
of the other, 

I will not deny that trade can be less advanta- 
geous to one party than to the other. It is 
always hard to precisely measure the values 
involved, yet in the nature of things this diffi- 
culty is unavoidable. An article is worth to me 
what I am willing to give for it, altho another 

[ 48 ] 



TRADE AND PROFIT 

may be willing to give more or less. If one 
makes a bad bargain, he is the victim not of 
trade but of bad trading. Certainly mere trading 
should not be regarded as the cause of the un- 
just enrichment of which men complain. Nor- 
mally conducted, as it must be in the long run, 
it results in benefits to both parties. Men be- 
become rich by reason not of what they carry 
out of it but by reason of what they carry into 
it. Those who have more to exchange will al- 
ways be better off than those who have less, 
and to this consequence of trade none should 
object. 

Heretofore I have confined myself to the 
simplest sort of trade, namely that which is 
carried on between the producers of various 
commodities. Trade however is never so simple. 
Consumers of goods never meet face to face 
with producers of what they themselves need. 
The cobbler who needs beef may find it hard to 
discover a butcher who needs shoes. To avoid 
this inconvenience, money was invented. But 
money does not avoid all the inconveniences of 
trade. It may be hard to find a buyer for goods. 
The maker is as a rule too busy to undertake 
this task, and it is therefore entrusted to one 
who makes a business of trade. The merchant 
buys from the producer and sells to the 

l 49 ] 



TRADERS 

consumer; and as his service is useful to both, he 
is allowed what is called a profit for perform- 
ing it. 

Not all merchants get rich, but some of them 
do. Why? Is it not because those who render 
a better or greater service get more than the 
rest? The man who buys corn in Massachusetts 
for sale in Kansas, will not do as well as he who 
buys corn in Kansas for sale in Massachusetts. 
Merchandising is a science which requires ability, 
experience and resources. Of those who under- 
take it, few are what is called successful, and 
because many fail we are apt to assume that 
they are the victims of those who succeed. 

Disregarding for a moment the welfare of the 
individual, what does the welfare of many men 
engaged in various occupations require? Each 
makes one thing, and that thing must somehow 
be exchanged on fair terms for every other 
thing which he needs. If he gets a fair price for 
his own commodity and pays a fair price for 
another's, he is as prosperous as he deserves; but 
if he gets little and pays much, he is the victim 
of another's rapacity. The merchant or trader, 
helps him to get a fair price and protects him 
against paying an unfair price by buying in a 
cheap market and selling in a dear. He 
who achieves that service accomplishes it in 

l 50 i 



TRADING 

competition with others having the same object. 
Should he not be encouraged to succeed ? Much 
depends upon him. If he buys where goods are 
dear and sells them where they are cheap, has 
he not hurt both sections? Has he not made 
harder to get what was already hard to get, 
and made more abundant that which was already 
abundant? Who, under such circumstances, is 
better off as the result of his intervention? If 
on the other hand he buys corn in Kansas and 
sells it in Massachusetts, has he not done good 
to both sections by enabling one to dispose of 
what it has to sell and the other to get what 
it wants? 

Simple as this service seems, all men are not 
equally competent to perform it, and a shrewd 
trader will always drive out a foolish one. No 
one should complain of such competition. It is 
called the life of trade, and it is: it tends to 
confine trade to those who understand it and 
render a service by conducting it. If we assume 
that the successful trader has rendered this 
service, should he not be rewarded? His inter- 
vention has been helpful to producers and con- 
sumers. He has hurt neither. His profit does 
not come out of either. Corn in Kansas is 
worth so much, in Massachusetts so much more. 
To buy at its worth in Kansas and sell at its 

[51 i 



PROFIT AND SERVICE 

worth in Massachusetts does not hurt anybody. 
If the merchant did not buy in Kansas, wheat 
would be worth less there, and if he did not sell 
in Massachusetts, wheat would be worth more 
there. The difference between the local values 
affords a profit to the merchant, but that profit 
always represents a service rendered. 

If this service were easy, all men would thrive 
by trade, yet they do not: neither should they. 
Consumers encourage him who sells for least; 
producers, him who pays most: between the two 
there is room for ability — for that sort of faculty 
which knows how to pay more and sell for less 
than another, that is, to help both producer and 
consumer. Underselling should not be depre- 
cated, save in those rare instances where goods 
are sold for less than they are worth in cut- 
throat competiton; and in such instances the loss 
falls on the merchant, not the consumer. The 
profits of a trader show his usefulness, and none 
should withhold from him what he has honestly 
earned. 

Great profits which go to swell great fortunes 
sometimes alarm us, but only because we do not 
understand their origin. A. T. Stewart made 
a vast fortune by selling goods cheap which 
had been dear, and at the same time was the 
best buyer in the market. He diminished the 
cost of distribution. 

I 52 ] 



USURY 

People are mistaken who deprecate the enrich- 
ment of traders. If good ones did not thrive 
there would be no inducement to promote the 
general welfare by discovering and satisfying on 
favorable terms the various needs of various 
members of the community. We should rather 
admire than contemn success in trade. Such 
success is never won by hurting — it is always the 
result of helping. The merchant prince is a 
benefactor of mankind and none should envy 
his prosperity. 

I have discussed that sort of enrichment which 
results from trade and trading, and discovered in 
neither just cause for suspicion or resentment. 
It remains to discuss interest, or that increment 
which capital demands of the borrower. By 
reason of interest, men are enabled to live in 
luxury who seem to do nothing. Is it right that 
they should be permitted to do so? 

Usury has always been odious. Christ drove 
the money changers from the temple. For many 
centuries the Church forbade it. During long 
ages it was deemed hurtful and hateful by all 
good men. "The usurer is the great Sabbath 
breaker; his plough goeth on Sunday" contains 
a general and persistent opinion. Jews were 
persecuted because they were usurers. We have 
today in the statutes of many states severe 

[ 53 ] 



USURY — CAPITAL 

restraints upon the rates of interest that may be 
charged. If we search for the origin of this 
opprobrium, we shall find that it proceeded from 
the just resentment of men. Usury was an evil 
for many centuries. Men in distress borrowed 
so much, spent it and were required to pay more. 
The improvident heir resorted to the Jews and 
lost his heritage, and that trade became hateful 
which involved the ruin of so many. 

Today however these evils are confined to very 
narrow dimensions. Men no longer borrow in 
order to spend but in order to make money. We 
still justly condemn the money shark who 
afflicts the poor, but we should not despise a 
use of capital which enriches the borrower and 
the community. What is capital? Capital is 
saved wealth, and since all wealth is in a sense 
the product of labor, capital may properly be 
regarded as accumulated labor. As we use the 
word however, we mean by capital that part of 
saved wealth which is used in the production or 
distribution of other wealth. Every tool is 
capital. So is a machine, a factory, the raw 
material required and the wages paid pending 
the production and distribution of goods. Rail- 
roads, canals, highways and ships are capital, 
and all the innumerable instrumentalities of 
commerce. The function of capital is to help 

[ 54 i 



ACCUMULATION OF CAPITAL 

the laborer. A mechanical knitter will do the 
work of 7000 hands. Machines of various sorts 
increase the efficiency of the laborer from five- 
to twenty-fold. A century ago it cost 26 cents 
to transport overland one ton one mile; today 
the same quantity is carried the same distance 
for half a cent. Our present prosperity is in 
larger measure due to the general and wise use 
of capital than to any other influence, and for 
this reason it is indispensable to the general 
welfare that somehow a constant and adequate 
supply be provided. There are but two con- 
ceivable ways in which it can be provided: the 
state may furnish it, or its accumulation may be 
left to individuals. How can the state pro- 
vide it? 

The state as we know it is not a maker but 
a spender of wealth: it does not support in- 
dustry, but is supported by it. If it needs 
capital it must tax the property of its citizens. 
Can we rely on such a source for all the capital 
needed for the development of a great country? 
Let us assume that a law is passed which 
appropriates all private fortunes in excess of 
that modest competence which the majority of 
our fellow-citizens deem sufficient: and further, 
that as a consequence of such law, all of the 
factories and plants and transportation systems 

I 55 ] 



THE STATE AND CAPITAL 

of the country pass into the hands of office 
holders. How long will such capital last? If 
we allow it usury, the people are no better off, 
since they must pay. If we deny it usury, we 
must replace it. Capital is not immortal. Tools, 
machines, factories and railroads wear out. Are 
they apt to depreciate more or less rapidly 
under political control? If they do depreciate, 
how can the cost of renewals, enlargements and 
improvements be derived? Additional exactions 
from the people are impossible in the case 
assumed, without impairment of that moderate 
competence which we are willing to allow. If 
nevertheless we continue to appropriate private 
property, how long will the industrious part of 
the community continue to save what they can- 
not enjoy? The blight of the feudal system lay 
in its undefined exactions. No man had a 
motive to work so long as another had the 
power to appropriate the fruits of his labor. If 
we revert to the old plan and say to men, you 
may have so much and no more, is it likely that 
they will labor zealously after their allowance 
shall have been won? None but a dreamer, 
ignorant of history and of human nature, would 
venture to predicate an economic system on so 
false a foundation. 



[ 56 ] 



THE STATE AND CAPITAL 

If we do not resort to taxation, we must so 
operate the instrumentalities appropriated as to 
provide for their maintenance and immortality. 
In this event, the factories and railroads must be 
operated at a profit and the community will be 
no better off than at present. Will it be as 
well off? I have already discussed the dangers 
and inconveniences of communism and it is 
unnecessary to reiterate them. Public control 
is never efficient. Politicians are not good cap- 
tains of industry. An enforced labor is a slug- 
gish labor. Where no man has a motive to 
economy, little will be saved. A monopoly is 
apt to be careless of efficiency, for where wages 
depend upon political influence and the public 
must pay, every job will become a sinecure. 
The appropriation by the government of the 
railroads in 1917 was followed by an immediate 
increase of from 25% to 33% in the charge for 
transportation, and a corresponding increase in 
the wages paid. A reasonable nation, however 
generous its prosperity, should hesitate to em- 
bark upon so hazardous a plan, save as a desper- 
ate expedient to remedy a desperate evil. We 
need capital and should prefer to provide it in 
some other manner. It is now provided abun- 
dantly. The government has borrowed billions 
for war and other billions will be forthcoming. 

[57 ] 



PRIVATE CAPITAL 

In times of peace, capital seeks investment. 
States and cities get what they need at 3H% 
or 4%. Private capital has built the railroads, 
equipped the farmers with cunningly contrived 
machines, established lines of communication 
from ocean to ocean, and financed the industry 
and trade of this country so advantageously that 
none can compare with it in affluence and power. 
If it be asked how so great a sum has been 
provided, I answer, by the industry and provi- 
dence of millions of people, each of whom has 
a motive to save. We have learned how to in- 
corporate capital and can make a little profit- 
able. Small sums derived from petty savings 
furnish the great sums required for great under- 
takings. We pay interest on savings, and get 
all the capital we need by allowing it earning 
power. What harm has followed? Who is hurt 
by the lender's gain? Not the borrower. If I 
lend a man a plow, can he not afford to pay me 
for its hire? The great borrowers are the soul- 
less corporations created for profit and nothing 
else. The workman to whom I lend a machine 
increases his output five or ten fold. Do I 
wrong him if I ask a small part of his profit 
for the use of my property? 

Does usury impair the general welfare? How 
can it? It tends to induce the accumulation of 

I 58 ] 



FUNCTION OF USURY 

the capital required for efficient production and 
distribution, and results in more goods at less 
cost and cheap distribution. The merchant who 
borrows can sell more cheaply than he who does 
not. Trade is a hazardous undertaking and the 
profits realized should recompense the merchant 
for his services and risk. If we assume that 
10% is a fair return on money invested, the 
merchant who uses $100,000 of his own must 
make $10,000. If however another has but 
$50,000 and borrows $50,000 at 5%, he need 
earn but $7500 on the same sales, and can there- 
fore undersell. Usury as we now understand it 
is paid neither by the borrower nor the com- 
munity and cannot hurt either. If I make by 
the work of my hands in the course of a given 
time $1000 and save $500 which I invest in a 
machine to enable me to make twice as much in 
the same time, my increased output serves to 
increase the general stock of goods or make them 
more abundant. If I lend my machine to 
another exacting 34 or less of the benefit he will 
derive from its use, will my enrichment be the 
result of his work or his enrichment be the 
result of my help? These considerations cannot 
be ignored. The prosperity of a community 
depends upon the accumulation and abundant 
supply of capital. The usury exacted cannot 

l 59] 



GREAT FORTUNES 

hurt either the borrower or the community: it 
affords a motive to do what otherwise could 
not be accomplished. It encourages thrift and 
rewards self-denial. No evil can result from it. 
The capitalist can consume so much and no 
more. What he has in excess of his wants, he 
must use beneficially or waste profligately. To 
allow him usury is to encourage him to do 
good. None but those ignorant of affairs would 
venture to prohibit so fruitful a source of good. 
Usury does sometimes result in the accumula- 
tion of great fortunes, but such fortunes should 
not be feared. It is an old maxim that "riches 
take unto themslves wings and depart". He 
who makes a bad use of capital, that is a use 
which is not profitable to the community, cannot 
retain it. There are but three generations be- 
tween shirt-sleeves and shirt-sleeves, because it 
requires ability to manage a fortune. Few 
fortunes are inherited and transmitted unim- 
paired. If we consider the consequences of 
folly, extravagance, the distribution of estates, 
and the catastrophes which from time to time 
sweep over the country, we will not be apt to 
fear plutocracy. New men now and always have 
controlled business affairs. In spite of its power, 
capital must depend upon ability, and ability 
will in time appropriate capital. Happy is that 

I 60 ] 



USEFULNESS OF CAPITAL 

country which succeeds in inducing men to pro- 
vide capital and compelling them to make an 
advantageous use of it. America is today more 
prosperous than Russia not because its natural 
resources are greater but because it has more 
capital, its laws are wiser, its industrial system 
is more free, its men are more industrious and 
more intelligent and its property is more secure. 
If we revert to the old tyranny and deny men 
a motive to thrift, we shall sink into the old 
poverty. The poor man should never complain 
that the rich man is his enemy. Capital is the 
best friend of poverty. It fortifies energy. Labor 
is indispensable to capital. Each is dependent 
upon the other and the mastery is with neither. 
Each helps the other, — capital more than labor: 
it affords the tool, the place to work, the in- 
creased product, the greater part of the wages 
earned. 

What then becomes of the objections to pri- 
vate property which we set out to consider? 
What a man makes is his by the common opinion 
of mankind. He can make more by specializa- 
tion than by attempting all things. Where labor 
is divided, trade is indispensable. Trade is 
advantageous to both buyer and seller. The 
merchant who facilitates it is worthy of his hire. 
Capital is requisite to industry — it increases the 

l 61 ] 



PREDATORY WEALTH 

products of labor and cheapens the cost of dis- 
tribution. Usury induces the accumulation of 
capital. Its payment does not hurt the borrower; 
riches must be made of use to the community. 
Except they be usefully employed they cannot 
be retained. These are the general considera- 
tions which justify private property: common 
sense, experience, its private and general utility, 
its origin in service and self-denial, the spur it 
affords to industry, and above all the evils 
which it precludes. 

I cannot deny that there are bad ways of 
getting rich, nor that wealth may be and fre- 
quently is ill used; but these subjects I cannot 
discuss. The ways of the criminal and speculator 
are fugitive and various. I have considered only 
that normal sort of conduct which we most 
properly attribute to just men who thrive by 
helping their fellows, and that sort of enrichment 
which is the just result of that service. If the 
argument fails it is because it is difficult to 
make an argument which shall be satisfactory to 
those who lack property. What men cannot have 
for themselves they are reluctant to allow to 
others. Reason has very little to do with the 
matter. If we envy a man of greater ability, 
it is natural to deny his superiority; if we 
have less by deserving less, we can still question 

162 1 



COMMON ERRORS 

his right to more. The dissatisfied part of the 
community will ever find an excuse in an accu- 
sation. "Believe not much them that seem to 
despise property, for they despise it that despair 
of it", said Lord Bacon. 

I have ventured upon the foregoing apology 
not alone to justify private property to those 
who are ignorant of the considerations upon 
which it rests, but by the display of those con- 
siderations to make evident certain blunders 
and follies commonly committed which tend, by 
restricting or restraining the free play of eco- 
nomic laws, to impair the general welfare. The 
most prosperous among us, not content with 
the natural and just rewards of energy and 
service, are apt at times to pervert their efforts 
to unworthy uses and strive to get without 
giving and win without deserving. Combina- 
tions in restraint of trade, labor conspiracies, 
protective laws and burdensome taxes are the 
effects of prejudice or cupidity and tend not 
only to serious material loss but to general dis- 
satisfaction and unrest. Forgetting their mutual 
dependence and the actual interest of everybody 
in the efficiency and prosperity of his neighbor, 
class is arrayed against class, industry against 
industry, community against community and 
nation against nation. Labor unions restrict out- 
put under the delusion that such restriction will 

[ 63 i 



LABOR UNIONS 

result in giving employment to more men. 
Manufacturers combine to keep up prices. Com- 
munities are jealous of each other's goods, and 
attempt to excite a narrow and local feeling. 
Nations surround themselves by obstacles to 
trade which they call protective barriers. Taxes 
are imposed in hate. These and like wrongs 
are perpetrated in good faith by ignorant men. 
Let us examine the prejudices which prompt 
them and the effects which follow. 

The labor union seems to be of opinion that 
short hours, scamp work and restricted out-put 
tend to raise wages. This delusion is very old. 
It originated in China thousands of years ago, 
and still dominates that unhappy country. The 
Chinese have always been jealous of innovations 
and improvements. They hold, almost as an 
article of religion, that every labor saving device 
costs a man a job. As a consequence, twenty 
men are required to pull one up a river. Steam 
is excluded. Freight is carried by men. Goods 
are made by hand. In consequence of these 
follies, Chinese labor is the worst paid in the 
world. This fact, which none can deny, should 
arrest the attention of those who are now ob- 
sessed by a like delusion. Wages depend upon 
the wealth produced by labor. Where ten men 
are employed to do the work of one, the proper 

I 64 ] 



WAGES AND WEALTH 

wage of one must be divided among ten. The 
workman is reluctant to admit that he must 
subsist upon what he himself produces. He does 
not know that if he confederates to produce 
little, he conspires against his own interest. The 
economic law which I have endeavored to ex- 
plain exacts of every man that he shall contribute 
to the general stock of goods as much as he 
derives from it. If an individual evades the 
law by some hocus pocus, he is a parasite 
deriving his subsistence from another's effort. If 
he contributes no more than he gets, then when 
his contribution is small his wages must be 
small. 

An illustration of the operation of this law is 
afforded by the pathetic consequences of the 
introduction of cloth making machinery into 
Lancaster in the early part of the 19th century. 
Prior to its introduction, cloth had been made 
on hand looms, and thousands of people were 
employed in such work. The immediate effect 
of the use of machinery was to deprive every 
hand-loomer of his livelihood. That under such 
circumstances they should have hated and at- 
tempted to destroy the machine was natural but 
unfortunate. After years of bitter strife and 
sorrow, they were compelled to submit— with 
this remarkable result, that the average wage of 



I 65 ] 



WAGES AND RESTRICTED OUTPUT 

the district increased three-fold: as soon as they 
began to produce more, they got more. The 
propensity to create jobs by slack work is no 
less foolish than the opposition to machinery. 
We divided the tasks of industry in order to 
increase its output. To now restrict the output 
by slack work, is to revert to the old poverty. 
It is sometimes hard to discover the operation 
of the law in the immediate consequences of 
job-creating conspiracies. A brick-layer formerly 
laid 1200 bricks in a day; he is now permitted 
to lay no more than 700. Wages were then 
$3.00 a day and are now $6.00 more. How can 
the law be reconciled with the fact? 

Perhaps the dilemma is rather specious than 
real. It is not necessary to infer that what has 
followed an event is the effect of that event. 
All wages have risen in the same period of time. 
But if the increase is due to the restriction, then 
it is the result of what is odious and hurtful. 
No man should get more for work than it is 
worth; for if he succeeds in doing so, he thrives 
at somebody else's expense. Monopolies of all 
sorts are injurious. They levy toll on industry 
and derive their profits from spoliation. The 
constant and conscious object of every one en- 
gaged in industry should be to do his best, for 
that way lies prosperity. We are apt to forget 

l 661 



WAGES AND GOODS 

that wages are great or small, not as they are 
high or low measured in money but as their 
purchasing power is great or small. A man may 
receive $10 a day and be able to purchase but 
$2 worth of goods. When we sell and buy, we 
exchange labor for labor, and none can have an 
interest in getting little for his own. No one 
can get $10 worth of work for work worth $2, 
by any fair bargaining. To attempt such spolia- 
tion is to deserve disaster. Where a man gets 
five days wages for four days work, somebody 
pays for four days work five days wages, and if 
many are required to submit to such wrong, the 
industrial system is out of joint. Men who earn 
five dollars a day by honest labor, cannot long 
afford to pay ten dollars a day for dishonest 
labor. 

Conspiracies between manufacturers to keep 
up prices are equally injurious and equally 
wrong. They tend to make goods expensive or 
hard to get, and disturb that equal, fair and 
just distribution which should be the aim of all 
honest men. High prices have always been 
alluring. A moment's reflection should discover 
how specious they are. To sell for a high price 
is to buy for a high price. The object of trade 
is the exchange of goods for goods; and their 
market values, however conventionally measured, 

167] 



GOODS AND PRICES 

cannot affect their intrinsic values. If a pair of 
shoes are worth a hat, it matters not whether 
these commodities be valued for exchange at $2 
or $20. People attribute prosperity to high 
prices, because advancing prices always attend 
an improvement in business. Yet the improve- 
ment cannot be the effect of the advance. A 
community which finds it harder from day to 
day to satisfy its wants is not progressive but 
decadent. Prosperity is the result of a con- 
trary tendency. When goods are easily pro- 
duced and readily disposed of, business is good. 
It neither hurts nor helps that money values 
advance; always provided they advance equally. 
Where however, owing to combinations, certain 
goods advance and others remain stationary, the 
disparity must always result in the arrest of 
trade. What is hurtful to the community cannot 
in the long run bring profit to the wrongdoer. 
The crises which from time to time disturb all 
commercial affairs are due to a growing disparity 
between the prices demanded and the means of 
payment. There is a price which the average 
man cannot pay. When he ceases to buy, the 
demand for goods falls off and industry lan- 
guishes; and when as a result of such stress 
prices are reduced, the demand is renewed and 
business revives. Conspiracies in restraint of 

I 68 ] 



REGULATION 

trade temporarily result in unjust enrichment; 
yet in the long run cheapness is more profitable 
than clearness — service than spoliation. 

All efforts to fix prices or wages arbitrarily are 
doomed to ultimate failure. They must fail 
because they result always in wrong to some 
class of the community, and there is a limit set 
by immutable laws to wrong doing. The law 
of supply and demand cannot be repealed. Since 
the beginning, ignorant men have been striving 
to evade it — never successfully. In Elizabeth's 
time wages were fixed. During the Dark Ages 
and down to our own time many many attempts 
were made to fix prices. Today we are attempt- 
ing to do what our ancestors tried to accom- 
plish by valuers in the thirteenth and fourteenth 
centuries. They tried and we try to establish 
what is thought to be a justum pretium for 
goods. The result of such interference is always 
uncertainty, confusion — wrong; and always will 
be. No man's intelligence is equal to such a 
task. To fix a price too low is to give a man 
too little for his labor; to fix it too high is to 
hurt the purchaser. Benevolence cannot esti- 
mate the relative values involved. What I, 
having nothing to sell, think of the value of 
another's property, may be less than he can get 
for it, or more than he can get. It is worth in 
exchange what another will give for it. 

[69 ] 



PRICE FIXING 

In the sixteenth century there were three 
years of drought in England, and to alleviate 
the general distress the King sent his commis- 
sioners into every county with instructions to 
inventory and value all farm products and com- 
pel their sale at the prices fixed. Almost imme- 
diately there was a great outcry, for no goods 
were brought to market. The commissions were 
revoked with this significant comment: "We 
cannot induce men to accept 6 d. for a shillings- 
worth". We tried a similar experiment during 
the American revolution. So did France under 
the Directorate. Neither was successful. Today 
we seem to be succeeding — not because we have 
power to fix prices but because the government 
controls transportation. England controlled the 
price of corn during the Napoleonic wars by 
excluding foreign grain from its ports. The 
effect of our interference has been not to put 
prices down but to put them up. We create a 
monopoly by restricting the supply. Under 
normal conditions prices are automatically ad- 
justed. An advancing price tends to stimulate 
production, and increased production tends to 
lower prices. To require a man to sell for less 
than cost is to stop production and inflate the 
price. The object of trade is mutual benefit, 
and he who robs it of its reciprocal advantage 

I 70 ] 



MINIMUM WAGE 

kills it. Price-fixing results in wrong to one or 
other — producer or consumer, and that wrong 
cannot be long endured. If some are so en- 
riched, others must suffer a corresponding loss. 

Laws prescribing minimum wages hurt the 
very people whom they are designed to help. 
If an employe cannot earn what must be paid 
him, no one will give him work, and he is 
denied the right to earn what he can. We 
remedy what seems to be an injustice in one 
case by inflicting a wrong in another. That we 
cannot at once require an employer to give 
work and a minimum wage, ought to be evident. 
Where a miner can or will produce coal worth 
one dollar only, no one can afford to hire him 
for two dollars. 

The infirmity which afflicts the social reformer 
is ignorance of the nice balance maintained by 
economic law between supply and demand — 
labor and its recompense — service and property. 
He is disposed to deprive Peter of something in 
order to help Paul. If he knew how and would 
teach Paul to help himself by helping others, 
many of the mischiefs which now afflict us 
would cease to do harm. I must admit that 
there are situations which seem to require drastic 
remedy, all laws to the contrary notwithstanding; 
yet even in such instances, unforseen and inju- 
rious consequences are apt to follow. 

I 71 ] 



PROTECTION 

Lysis, a famous orator, persuaded the Greeks 
two thousand years ago to punish the corn 
dealers because they had raised prices. His 
argument, stripped of tinsel, amounted to no 
more than this: if you wish cheap corn, punish 
these men with death. They were executed, but 
the price of corn advanced. If in time of 
famine provident men who expect calamity and 
take proper precautions, be treated as malefac- 
tors, none will dare to do what the general wel- 
fare requires. 

It is easy to disturb the intricate and compli- 
cated methods whereby goods useful to the 
community are provided and distributed under 
a system which originated in and depends upon 
experience rather than reason. The reciprocal 
play of powerful influences operating upon all 
is more trustworthy than any cunningly devised 
expedient of speculative philosophy. The inno- 
vator is more apt to hurt than to help. 

Of all the evils which have retarded the pros- 
perity of mankind, none is more remarkable than 
that which is disguised under the benevolent 
mask of protection. The word is of modern 
origin, but the pretence is old. Selfish men, 
benevolent philanthropists, misguided statesmen, 
busy-bodies comprehending nothing but eager to 
follow another's leading, and ignorant workers 

I 72 ] 



PROTECTION 

striving to get more than they deserve, have 
confederated throughout the ages to support a 
body of doctrine plainly antagonistic in its actual 
operation to the very interests which it pretends 
to promote. Protection always involves an 
essential evil: it "protects" the consumer of 
goods against the goods. We have divided or 
specialized the labor of the world in order that 
it may be more productive, and have induced 
the production of the right articles by making 
every specialist depend upon the exchange value 
of his own goods. So only can he be induced to 
produce what another needs. To interpose an 
obstacle between them and the gratification of 
their desires cannot protect either; yet the 
doctrine is founded on such an expedient. 

It is unnecessary to trace the history of this 
remarkable heresy. It had its origin in the 
paternalism of the old systems of government. 
The tyrant, king or emperor found it hard to 
trust any intelligence save his own and that of 
the parasites who surrounded him. Even under 
the Republic, Rome thought it necessary to 
compel every man to follow the calling of his 
ancestor, under the delusion that if industry 
were free men would not do what the general 
welfare required. Guilds and monopolies 
were the curse of the Middle Ages. Native 

[ 73 ] 



ORIGIN OF PROTECTION 

manufacturers, feeling the stress of foreign compe- 
tition, found it easy to induce impecunious rulers 
to levy taxes which had the effect of embarassing 
importations. Private cupidity and public need 
undoubtedly originated the protective system. 
When, by the growth of commerce the enrich- 
ment resulting from foreign trade had become 
evident to many people, the restiveness of the 
merchants under hampering restrictions, was 
allayed by an ingenious argument which they 
found it hard to resist. "What," said the advo- 
cates of protection, "is the object of trade: is 
it not to convert goods into money? If this be 
its object, then that trade which brings money 
in is profitable and that which drives it out is 
unprofitable. We should therefore encourage 
exports and discourage imports." As a result of 
such specious reasoning, the mercantile policy, 
as it was called, became firmly established all 
over Europe and obtained until recently even 
in England. 

The American colonists, ignorant perhaps of 
the argument, were soon induced to adopt it by 
a series of events resulting in great local dis- 
comfort which they were unable otherwise to 
explain. Starting from the old country, they 
converted their wealth into its most portable 
form, and instead of bringing bulky goods 

[ 74 1 



HISTORY OF PROTECTION 

brought specie. Money of course had little 
value in a wilderness, and in the course of a 
short time was sent home to purchase the goods 
needed. Inconveniece was the natural result of 
such exportation. Domestic trade needed a 
medium of exchange and measure of value. 
Ignoring the influences which induced the out- 
flow of specie, the settlers adopted the expedient 
of paper money, and inconvertible paper money 
as we now know will drive out of circulation 
and keep out all money having intrinsic value. 
The troubles which followed led foolish men to 
attribute the mischief to the importation of 
goods, for goods imported had to be paid for, 
and as the Pilgrims lacked commodities they 
were compelled to send specie. 

A century and a half of incessant embarrass- 
ment did not afford the instruction requisite for 
the adoption of the proper remedy. The first 
act passed by the Congress of the United States 
was directed against foreign goods, and after a 
while a remedy for the evil was found, not by 
the wit of man but in the consequences of that 
gradual industrial development which attended 
the growth of the settlements. Fishermen sold 
salt cod in the West Indies for silver, brought 
the silver home and thence it was exported for 
goods needed. In time domestic goods were 

[ 75 ] 



THE CORN LAWS 

used for a like purpose; and gradually, but only 
after a long period, was commerce put on a right 
basis. Not even then however did men perceive 
the underlying principles of trade. Jealousy of 
imports had become an established tradition; 
and long after they had ceased to result in 
special inconveniences selfish men found it easy 
to appeal to and profit by the general prejudice. 
Today in America that tradition is still firmly 
established. The argument for it has been 
modified to secure and retain votes enough for 
its support, but its prosperity rests upon the old 
prejudice. Manufacturers now say they need 
protection not for themselves but for their work- 
men, and pretend that high wages are the results 
of high duties. This interesting pretension is 
now part of the economic gospel of the country. 
Perhaps the best way to dispel it is to trace 
the emancipation of the English people from a 
similar delusion. Until the beginning of the 19th 
century England was governed by the country 
gentry. Agriculture was presumed to be the 
foundation of its prosperity, and to protect agri- 
culture the importation of corn was restricted or 
prohibited. Adam Smith had long ago pointed 
out the iniquity of such restrictions, but his 
book had not yet become orthodox. Pitt having 
read it and been convinced by it, forced through 

l 76 1 



COBDEN 

Parliament a law emancipating Irish commerce 
from prohibitions imposed for the presumed 
benefit of the English; but the Irish parliament 
rejected the boon. In the early part of the 19th 
century, Cobden began his famous agitation for 
the repeal of the corn laws. He was a manu- 
facturer of cloth, who found his markets greatly 
curtailed by imposts which not only reduced his 
profits but raised the cost of living to his 
operatives. His attempt met with violent and 
contemptuous opposition. Perceiving the diffi- 
culty of convincing the landed aristocracy, he 
set himself to the instruction of the people and 
after a long, arduous and dangerous campaign, so 
far succeeded as to provoke the serious atten- 
tion of statesmen. 

The argument which prevailed was extremely 
simple. To the farmer he said, Why do you 
work; how much corn do you produce by your 
labor; what do you sell it for; what are your 
wages? When men admitted that they worked 
to produce corn, and produced by very hard 
work about seven bushels to the acre, and sold 
it at a price which realized for themselves about 
8 shillings a week, he said to them: Leave your 
fields; come into my factory, produce cloth and 
I will procure for you twice as much corn and 
pay you twice your present wages, provided you 

l 77 ] 



REPEAL 

will help me to repeal the law which now keeps 
you poor. The argument was striking — and 
incredulity yielded to faith when he explained 
that cloth made in England might be exchanged 
for more American corn than could be produced 
in England by twice the labor. 

Cobden's campaign was helped by the misery 
and discontent which followed the waste of the 
Napoleonic wars, but even suffering and riot 
failed to disturb the stupid serenity of the land 
owners. Their profits seemed to depend upon 
the exclusion of corn, and they could not under- 
stand how any man could be discontented so 
long as the gentlemen of England flourished. 
One man however, of first rate ability and great 
power, was convinced. He brought in a bill to 
repeal the corn laws, availing himself of an Irish 
famine to overcome opposition, and passed it 
through a reluctant House of Commons. Almost 
immediately prosperity began to revive. Even 
the land lords were enriched in spite of them- 
selves. Having to compete with foreign corn, 
they improved their methods and increased the 
yield of corn fourfold. The prosperity of all 
classes, notwithstanding the innovation, led to 
the investigation of the principles of political 
economy — the usefulness of trade and the harm 
resulting from hindrances to the exchange of 

l 78 ] 



PROTECTION IN AMERICA 

commodities; and after a time all protective laws 
were swept aside by the rising tide of enlight- 
enment. 

America seems to have been untouched by the 
new doctrine. While England was busily en- 
gaged in emancipating its commerce, the Con- 
gress of the United States was forging chains for 
its restraint. I have been unable to find any 
echo of Cobden's agitation in any contemporary 
American publication. The index to McMaster's 
History of the People does not contain Cobden's 
name. Webster's great speech in advocacy of 
free coal for Massachusetts industries was fol- 
lowed by an equally great speech in which he 
supported Clay's policy of exclusion; but in 
neither does he refer to Cobden or Bright. 

This remarkable fact requires explanation. 
Perhaps the remoteness of England and the 
difficulty of communication shut us off from even 
the most important events in its experience. I 
incline however to believe that we were too 
much occupied by internal affairs to understand 
even so significant a revolution as the repeal of 
the Corn Laws. Specie was still scarce among 
us. Paper currencies prevented its use. Always 
in want of specie, we attributed its loss to the 
importation of goods. That jealousy of foreign 
goods had its origin in this error, seems to be 

[ 79 ] 



BALANCE OF TRADE 

established by the persistent use of the phrase 
"adverse balance of trade" and the care with 
which we have always guarded domestic trade 
against all restraints. The absurdity of the 
phrase cannot be exaggerated. What is trade? 
Is it not the exchange of goods for goods? 
Can the balance be "favorable" when more are 
exchanged for less? Was the balance "favorable" 
throughout that long period of time during which 
we constantly exported more than we imported? 
The fantastic notion that a balance of trade can 
be either favorable or unfavorable is hard to 
understand. Our excess of exports indicates no 
more than that as a debtor nation we have 
shipped goods for goods and also goods to pay 
interest on what we have borrowed. We made 
a profitable use of England's capital and sent 
abroad her share of the benefits realized. Eng- 
land's imports have been greater than her ex- 
ports for a century, yet she has lost no money 
by reason of this "adverse" balance of trade. 
Throughout the period she has been the money 
market of the world. How can this fact be rec- 
onciled with the prevailing delusion? England 
has become rich because her income has been 
greater than her outgo — not in money but in 
goods. The United States has also been prosper- 
ous — although her income in goods was less than 

180 ] 



BALANCE OF TRADE 

her outgo. Both are better off. She enriched 
us with her capital, we her by paying interest 
for its use. The balance has always been even. 
I know that under certain circumstances what 
is called an "adverse" balance of trade must be 
corrected by the export of money, but why, 
under such circumstances, do we use money and 
no other commodity? Is it not because it is 
more advantageous to pay in money than in 
goods? How can that be properly regarded as 
"adverse" which is profitable to us? In a great 
emergency such as confronted England at the 
outbreak of the war in 1914, she needed goods 
immediately which could not be paid for with 
goods, and naturally and instinctively sent to 
us a flood of gold. The mistake she made was 
not in using gold to get what she needed more, 
but in her estimate of her needs. All the gold 
in her coffers could not pay for half the goods 
needed. Vaguely apprehensive with respect to 
her own currency, she made a grave blunder at 
the start and attempted to check the outgo of 
gold, not by restricting her buying, but by re- 
stricting its export. The result of her folly was 
a great rise in the cost of what she needed. 
Her trade became "adverse" to her not in the 
conventional sense, but in the sense that her 
immediate needs could not be satisfied by her 



I 81 ] 



TRADE AND MONEY 

ready resources. As soon as she understood her 
predicament, she adopted the right expedient, 
and trouble was averted. Buying on credit, she 
retained her gold and her goods. 

No one need ever fear an "adverse" balance 
under normal conditions. Gold is never ex- 
ported unless it is advantageous to do so. No 
disaster should follow. If its export results in 
inconvenience at home, that is, if gold become 
scarce at home, its purchasing power will rise 
and the direct and necessary result of such 
advance will be to draw gold from abroad. 
Money seeks its best market as instinctively as 
wheat or any other commodity, and it is incredi- 
ble that it shall be long lacking in that country 
where it will buy most. 

I have discussed the current delusion with 
respect to the "balance of trade" because it 
aided in the establishment of our protective sys- 
tem and lies at the root of much foolish thinking 
with respect to the nature of trade. Lincoln's 
hat story, already referred to, affords an illus- 
tration of the use made by protectionists of the 
delusion. Turning now to protection, we are 
confronted by an anomaly which demands ex- 
planation: we emancipate domestic trade and 
protect against foreign trade. Why? The ad- 
verse balance of trade notion being out of the 

[82 ] 



INCIDENCE OF DUTIES 

way, what other delusion induces us to do so 
absurd a thing as to hinder our foreign markets 
for goods by restricting their exchange for other 
goods? 

There are various answers. Some people have 
a notion that the foreigner pays the duty, and 
therefore approve a policy which relieves them- 
selves from taxation. Let us consider this error. 
I, a farmer, take my wheat to its best market, 
Liverpool, and exchange 100 bushels for a suit 
of clothes. When I arrive at New York, the 
government compels me to pay $60 duty upon 
the goods. What foreigner pays the tax? If 
I assume that the suit is sent to America and 
here exchanged for my wheat, must I not pay 
in wheat 100 bushels plus the duty? By what 
motive can the foreigner be induced otherwise 
to sell in America? Moreover, the dictum that 
duties add to the price which must be paid by 
Americans for foreign goods is the very founda- 
tion stone of protection. Domestic goods, it is 
assumed, should not be compelled to compete in 
price with foreign goods; and such competition 
is overcome by loading foreign goods with the 
duty: that is, raising the cost of them to the 
American consumer. 

The arguments for protection are too various 
for discussion. None of them proceed upon any 



[ 83 ] 



DOMESTIC TRADE 

intelligible, economic principle. Adam Smith has 
never been understood here. His doctrine was 
rejected even in England for fifty years. Ob- 
scured perhaps by national jealousies, it made 
no progress any where. France rejected Turgot 
and admired Colbert. Every nation was ob- 
sessed by the mercantile delusion that trade is 
profitable to the seller alone. None perceived 
the reciprocal advantages of a free exchange of 
the products of a divided and diversified in- 
dustry. The American colonies were jealous of 
each other. Local imposts and restraints upon 
trade among the members of the Union were 
surrendered reluctantly — not because men per- 
ceived them to be injurious, but because they 
felt the kindling emotion of a common cause and 
a common victory. What they imposed upon 
themselves, as if in mutual sacrifice, they re- 
fused to allow to other nations. Today, as a 
result of that sacrifice, we have free trade among 
100,000,000 of people widely separated and vari- 
ously occupied, which we scrupulously defend 
against every encroachment; yet we as jealously 
prohibit the obvious benefits of such trade be- 
tween ourselves and millions of foreigners more 
variously occupied and therefore more necessary 
to ourselves. 

[ 84 1 



AMERICAN POLICY 

A startling fallacy like Lincoln's seems to be 
most influential with the crowd. Thiers when 
asked why he imposed certain duties on imports, 
said "I wish to see the chimneys of France 
smoke." His banality staggered his enemies, 
delighted his friends and won an instant victory. 
Nevertheless the connection between a smoking 
chimney and a duty on imports is obscure. The 
implication contained in the retort is of course 
false: one may make a chimney smoke by burn- 
ing very precious wealth. A smoking chimney 
is not an end of itself: we consume coal to pro- 
duce wealth of greater value. The real question, 
whether by burning coal we create such greater 
value, is smothered by the smoke. It cannot be 
worth while to burn coal to make at an expense 
of one dollar what we can buy for fifty cents. 

That the American policy was not a reasoned 
policy is evident if we consider that trade can- 
not be beneficial as between Maine and Cali- 
fornia and at the same time injurious as between 
Maine and Canada: excellent east and west, 
criminal north and south. The original argu- 
ment for infant industries was perhaps plausible 
a hundred years ago, but why after a century 
of fostering do those same industries now need 
a far greater degree of protection than that 
which sufficed for their establishment? Having 

185] 



AMERICAN POLICY 

searched diligently, I can find no satisfactory 
ground for what Clay proudly called an Ameri- 
can policy but the prejudices which were due to 
a peculiar experience from which we have never 
been emancipated by trial. America has always 
been prosperous in a general sense. Its re- 
sources were immense, its territory boundless, 
and wealth was within the reach of every indus- 
trious worker. The petty restraints imposed 
upon an inconsiderable foreign commerce did 
not prevent the free exchange of goods among 
ourselves. Because the protective system re- 
sulted in no distinct, visible and lasting harm, 
we have never tried to get rid of it. 

England was emancipated by a famine. We 
have had no famine. By reason of our good 
fortune, we have never been compelled to con- 
sider and understand the inconvenience and loss 
actually resulting from our blunder. We take 
for granted that a system which is not obviously 
injurious must be advantageous. How little 
reason is used with respect to the questions in- 
volved appears in every political campaign. 
Orators tell us foolish things unabashed and 
unchallenged. One uses the balance of trade 
argument, another says the foreigner pays the 
tax; another says that infants one hundred years 
old must still be "protected", and another that 

t 861 



WRONG OF PROTECTION 

wages are high because goods are expensive. It 
is fruitless to discuss a question obscured by tra- 
dition and entrenched behind an inveterate habit. 
If I say that you cannot make goods or wages 
or prosperity by law, none will attend. To 
point to the fact that men who ' 'protect' ' Ameri- 
cans against the pauper wages of Europe import 
paupers, is to excite anger. Many men are 
enriched by protection. The laws compel others 
to pay them tribute. Their wealth is ill got. 
What one man produces by the sweat of his 
face, the law compels him to exchange for less 
than its worth in order to enrich another. If 
protection were not spoliation, it would be 
absurd. To protect A against B and B against 
A, involves a manifest absurdity. If I get more 
because another gets less, and he gets more 
because I get less — what we each make we each 
lose, and so the protection is fatuous. 

Protection is wrong in theory and wrong in 
practice. We perform various tasks and 
thereby intend to help each other. We make to 
sell and buy to use. Our mutual welfare de- 
pends upon a just exchange of goods for goods. 
Protection compels some of us to receive less than 
our goods are worth, and give to others more 
than their goods are worth. The farmer who 
can exchange 100 bushels of wheat for a plow 

[87 ] 



FREE TRADE 

in England is required to pay 150 bushels to an 
American — to what end? In order that the 100 
year old steel industry may be fostered into 
manhood, or that some Bohemian who cannot 
speak English may get high wages, or that an 
adverse balance of trade may be avoided, or 
that plows — to use Mr. Harrison's impressive 
phrase — may not be cheap and nasty. 

Let me take a particular instance, now likely 
to excite prejudice, and examine the effect of 
protection upon trade with an enemy whom we 
have every reason to dislike. Germany produces 
dyes say for less than any other country: why 
should we ' 'protect" ourselves against them? 
In order that we may learn to make them at 
greater cost? If we do not succeed in making 
them for less, is it not better to purchase them 
with other commodities which she needs? What 
harm can result? If we yield her a profit on 
her product, do we not get a profit on ours? 
By producing dyes at greater cost than we can 
buy them, we must lose the difference somehow. 
Germany can gain no more by selling than we 
by buying. Why should we prohibit such recip- 
rocal service? Should we not rather bind her to 
our service than prohibit her to serve us? The 
system which we have evolved as a result of 
experience rests upon the principle that it is 

[ 88 ] 



TAXES 

advantageous for all that each should be induced 
to do that which each can do best. Protection 
induces men to do what another can do better, 
and thereby impairs the general prosperity. We 
can grow bananas under glass in Maine: would 
it be profitable to exclude the tropical fruit in 
order to establish such an exotic industry? 

At the risk of being tedious, I have endeavored 
to show the origin of the protective system, the 
fallacies by which it is supported and the actual 
derangement which it effects in that superior, 
natural and spontaneous system which we have 
found to be so advantageous. If trade be 
profitable to buyer as well as to seller; if the 
fruits of a divided labor cannot be justly dis- 
tributed without free trade between the various 
factors of wealth, then protection is a delusion 
and a snare. It restrains trade; it secures to 
special producers more for their goods than they 
are worth; it forces another producer to take 
less than his are worth. It is unjust and injuri- 
ous and results in a private enrichment which 
is won by no corresponding service. 

Taxes invite consideration because people are 
not apt to understand the effect of such imposi- 
tions. They are levied by representatives of a 
majority who are prone to make them as heavy 
as possible under the delusion that taxes are 

[ 89 ] 



BURDEN OF TAXES 

paid by the rich. Let us consider a special 
instance. If the whole stock of corn amounts to 
1000 bushels, of which A owns 100, a tax on 
A's share seems to fall on A only; but this is 
not always true. A may intend either to con- 
sume the corn or sell it. In both cases the 
tax falls on the community. We find it hard to 
understand such effects because taxes are paid 
immediately in money, and only ultimately in 
goods. Where a millionaire pays $1000 into the 
public treasury, the money is disbursed in sala- 
ries and wages and we are apt to think such 
salaries and wages are paid by the millionaire. 
They are, in a sense, but not in effect; for every 
employe who gets money from the public 
treasury immediately spends it for food, clothing 
and other goods. Who produces the goods? 
Not, according to the case assumed, the million- 
aire, for all goods must be produced by labor. 
If this be true, then all taxes fall ultimately 
upon the productive labor of the country, and 
however they be distributed, must ultimately 
result in the appropriation of goods produced by 
labor. They always tend to diminish the general 
stock of goods. If a community produces $10,- 
000,000 worth of goods, and taxes amounting to 
$5,000,000 worth are gathered and consumed by 
the public employes, but $5,000,000 worth will 

190 ] 



TAXES AND GOODS 

be left for the use of the workers. The heavier 
the tax, the harder it is for men to live. Par- 
ticular industries may not immediately feel this 
effect, because prices advance as taxes are in- 
creased; but nevertheless every producer is a 
consumer of goods and what he makes as pro- 
ducer he must lose as consumer: altho he may 
seem to get more, he in reality is getting less. 
An industrious German peasant who gets high 
wages may nevertheless, as a result of indirect 
taxation, starve to death. All taxes ultimately 
fall on the consumer of goods- — no matter how 
they may be levied. The majority cannot evade 
their share. Pay they must, somehow, soon or 
late, in meat, rent or labor. 

I have discussed these various expedients 
whereby clever men have attempted to evade or 
hinder the operation of economic influences, in 
order to emphasize the value of those influences 
— the good they accomplish and the evils they 
tend to mitigate. Restricted output, combina- 
tions to raise prices, duties on imports, taxes 
however imposed, tend to impair the purchasing 
power of labor and to withdraw from the laborer 
that just share of the common wealth which 
his industry deserves. Ingeniously, cunningly 
and always oppressively, selfish men have con- 
trived and schemed to escape the economic law. 

(91 ] 



SUMMARY 

They may succeed for a time, with the aid of 
unjust and injurious legal devices, but always 
the economic law tends to restrain and correct 
them, The free, spontaneous system evolved 
by the experience of mankind, is wiser, juster and 
more beneficial than any contrived by the delib- 
erate purpose of any man, however able. We 
are constantly interfering with its operation, but 
can never quite succeed in defeating the salutary 
restraints which it imposes, the good which it 
compels. 

We have now traced the organization of indus- 
try from its origin through the various stages of 
its development, to the complicated but admir- 
able system which is now firmly established. 
Founded upon the natural desire of every man 
to help himself, it has resulted in an harmonious 
cooperation whose guiding principle is mutual 
service. Selfishness has not ceased to be influen- 
tial, but it has ceased to be harmful, for every 
man's private welfare is so firmly yoked to that 
of his fellows that strive as he may he cannot 
emancipate himself. The labor of each is a 
specialized labor. No one consumes what he 
makes. Making for another's use, each must 
make what another needs in order that he may 
get what he himself wants. Actuated by selfish- 
ness, men have become cunning and zealous in 

192 ] 



SUMMARY 

mutual service. Labor is free* but not absolutely 
so: it is free to do good but not to do harm. 

Trade enriches all who engage in it. Neither 
party can thrive at the expense of the other. 
Each gets what he needs in exchange for what 
he wants, but neither gets more than he gives. 
And so the increasing products of a divided 
industry are distributed justly and ratably 
among the various factors of wealth. 

Vaguely perceiving the mutual advantages of 
trade, we have emancipated it from restraints 
and provided ingenious facilities for conducting 
it, such as money and markets. To enlarge the 
benefits resulting from it, we have encouraged a 
class who devote themselves to searching out the 
resources and wants of remote communities, and 
by their aid the fruits of the fields are brought 
to the doors of the manufacturers and the 
products of the factory to the doors of the 
farmer. Distant countries have been invaded 
and explored and their greatly diversified pro- 
ducts made to contribute to our prosperity and 
theirs. 

To another class we have entrusted the busi- 
ness of transportation, and by its aid the cost 
of moving goods has steadily declined until now 
it is one-tenth or one-twentieth of what it was 
half a century ago. 

[93 ] 



SUMMARY 

Still others provide the capital required for 
machines, highways, ships and trade. We have 
induced saving by rewarding it, and now millions 
pour the fruits of self-denial into the coffers of 
the banks, which in turn direct their investment 
or use for purposes profitable to the community. 

These things free men have accomplished by 
themselves, unaided and uncompelled, by a 
spontaneous, natural system which has resulted 
in the enrichment of the world. At its basis, 
affording a sure and firm foundation, is one 
notion, one principle, one fact: what a man earns 
is HIS. We allow the laborer his hire; the 
employer his profit; the capitalist his share of 
the wealth which he has helped to create and 
distribute. Take away this wage, this profit, 
this interest, and the whole structure crumbles 
away. Disturb the spontaneous and just dis- 
tribution of the rewards of service which men 
freely render to each other, and you rob them of 
a motive to mutual service and imperil industry. 
If some get rich, it is not because others remain 
poor. Riches is the servant of the people; 
property is the best friend of labor. 

We have a country rich in natural resources; 
an energetic and ingenious people; capital in 
abundance; every hand at work among us con- 
trols the energy of five; goods were never so 

[94 ] 



THE FUTURE 

easily produced; there is no limit to the pro- 
ductive capacity of men, and none to their 
desires. Why are we not all rich? Goods are 
riches. We can produce as many as we wish. 
We now deliberately produce few, save under 
those rare conditions of feverish prosperity which 
cannot endure. Let me assume what we have 
never observed — that every employer knows his 
business; that his credit is good because deserved; 
that capital is abundant; that he is emancipated 
from all foolish restraints, commands the best 
machinery known to the craft and is surrounded 
by skillful workmen eager to assist; that all other 
industries are as well managed and as well 
equipped; and that trade is free; — what should 
be the consequence? Will not goods be abundant 
and fabulously cheap, and will not each get his 
share? Goods are made for consumption, and 
the workmen constitute nine-tenths of the popu- 
lation. It is they who consume nine-tenths of 
the wealth. Every increase in product necessa- 
rily involves a corresponding increase in the 
share of each. If those who need much or wish 
much will produce much, they cannot fail to 
thrive. Each depends upon the other, and upon 
the cordial and unrestrained cooperation of all 
classes depends the welfare of all. 

195 ] 



JUSTIFICATION OF PROPERTY 

Today we fear over-production, as if it could 
be an evil to have many goods of the right sort. 
What we should fear is dear goods, or goods of 
the wrong sort. Nothing tends so effectually to 
arrest trade as a gradual increase in the cost and 
price demanded for special goods. Cheapness is 
never an evil, provided all goods be cheap at the 
same time. If however the makers of one sort 
of goods demand more in exchange for them 
than they are worth to the community, trade in 
those goods must cease. Cheap goods of the 
right sort will always find a ready market. We 
must never forget that ultimately wages, profits 
and interest must be realized in goods and not 
in money, and that where goods are cheap the 
rewards of all enterprise and all service are 
correspondingly high. An unrestrained trade in 
cheap goods is the economic ideal for which all 
should strive, for such a trade affords absolute 
assurance that the right goods are being cheaply 
produced and justly distributed. 

The resentment which men feel when others 
thrive is a foolish sentiment, unwise and un- 
generous. If property is the result of service, 
none should envy it. Not even the greatest 
fortune is to be feared. Where it has been 
earned it will be wisely used. There are among 
us men of affairs and genius who have become 

[ 96 ] 



THE CASE OF MR. HILL 

benefactors of millions, and their fortunes are 
fabulous because their service to their fellows 
has been incalculable. 

James Hill of Minnesota died worth fifty 
millions of dollars. He first made money by 
dealing in wood. In the course of that business 
he became familiar with problems of transporta- 
tion, and bought a steamboat. Later he got 
control of a bankrupt railroad, and its business 
required him to penetrate and explore its terri- 
tory. He traveled constantly and discovered a 
great and resourceful region lying along the 
northern border of the United States which had 
never been developed. He undertook its develop- 
ment. His first problem was to secure capital 
enough for the enterprise. He encountered great 
opposition. Those identified with the Northern 
Pacific Railroad regarded with suspicion an 
undertaking which seemed to threaten an injuri- 
ous competition, but Hill persisted. He made a 
careful survey of the country to be traversed, 
ascertained the number of acres available for 
cultivation and the extent and value of its 
mines and forests. He calculated the cost of the 
railroad, the cost of operation and its probable 
income. In the course of time he convinced 
others of the feasibility of his enterprise, and 
secured the capital required. The road was 

197 ] 



MR. HILL 

constructed with the utmost care and economy. 
All possible routes were investigated, and that 
was adopted which cost least, allowed of most 
economical operation and promised the greatest 
income. He caused the lands through which 
the selected route passed to be tested by experts, 
ascertained the number of acres which an indus- 
trious farmer might most profitably cultivate, 
selected his settlers and saw to it that they were 
properly stocked and equipped; he examined the 
markets at which various crops should be dis- 
posed of and assumed the burden of transporting 
them at a charge which would allow of a profit 
to the farmer at such market. All of these vari- 
ous affairs he managed with the utmost ability. 
His road was well managed. He kept his cars 
full and moving. When business was lacking, he 
created it. Where the jealousy of his rivals 
interposed obstacles, he obviated them by bold 
and unexpected expedients. He was successful 
and made money for himself, his associates and 
the millions of men who settled by the way; and 
he added to the riches and resources of his 
country the products of an immense area stretch- 
ing from the Great Lakes to the Pacific Ocean. 
Is anyone disposed to think that Mr. Hill did 
not earn his millions? He was the benefactor 
of millions of men, and each freely rendered to 

I 98 i 



MR. HILL'S FORTUNE 

him a trifling part of the wealth he helped to 
create and market. His railroad is still the 
servant of the people, its rates are deemed satis- 
factory to the public authorities, it is well 
operated and no one complains of its service. 
The tradition established by him still prevails, 
and because its service is excellent and the 
property is well and wisely employed, the road 
continues to prosper. Did not Mr. Hill earn 
and deserve the great fortune which his sons 
inherited? How, in what manner, to what ex- 
tent has his sons' ownership of the securities of 
the Great Northern Railroad Company inter- 
fered with the general welfare? Who is worse 
off as the result of that ownership? The fortune 
left by Mr. Hill will be unprofitable to his heirs 
if it be not usefully employed. They cannot 
devour their income. What they save swells the 
capital resources of the country and assists its 
productive and distributive industries. They 
have been taught in a good school, and know 
how to employ capital. If they make a bad use 
of it, it will pass into other and more compe- 
tent hands and ultimately enure to the advan- 
tage of mankind, since otherwise it cannot be of 
value to its possessor. 

The moderate estate, limited to the actual 
needs of an average family, however alluring it 

[ 99 ] 



ABUSE OF WEALTH 

may be to the dreamy reformer who desires a 
beatific equality, will never provide more than 
the actual day by day wants of the people. 
We need more, more for war and more for 
peace; and if we need more, we should encourage 
its accumulation by rewarding those who make 
and save. 

I know that many make what is regarded as a 
base use of their incomes, but what use would 
you have them make of it? How can one man 
know the propensities and natural desires of 
another? What right has he to interfere with 
their gratification? What good will result from 
the impertinent interferences of one's neighbor, 
who insists, that I shall dress, eat and live as he 
thinks proper? However extravagant a man 
may be, there is a limit to the amount of wealth 
which he may devour. What he does not waste 
belongs in a real sense to the community, since 
it must be employed in its service. 

Property affords a basis not only for our in- 
dustrial system, but a solid foundation for what 
we call civilization. It affords leisure for that 
sort of thinking which tends to make people wise 
and that sort of refinement which tends to make 
them mutually agreeable, and that sort of cul- 
ture which enables them to understand their 
fellows, and that sort of security which is indis- 
pensable to what we call happiness. 

1 100 ] 



ABUSE OF WEALTH 

Today we praise charity and affect to despise 
the means by which it accomplishes its blessings. 
Who is more useful to the state — he who 
teaches ten thousand men to make an honorable 
livelihood by serving their fellows, or he who 
induces five hundred to submit to tender minis- 
trations of another's providing? Charity is ex- 
hausting; industry is productive. There is room 
for both in the world, but of the two industry is 
more necessary, for charity must depend upon it. 

I admit that property is abused, but so is 
every other human institution. There are mar- 
riages which are not delicious, religions that lack 
credibility, courts which cannot understand law, 
doctors who disagree, lawyers who strive rather 
for victory than justice; yet marriage, religion, 
justice and medicine should not therefore be 
condemned. We observe the flaunting ostenta- 
tion of the vulgar plutocrat and assume that 
property, not himself, is to blame. We wrong 
property. As an institution it should not be 
condemned. If it is unequally distributed, so is 
ability, character and energy. In inequality 
there is diversity and variety and mutual influ- 
ence. If all men were alike, thought alike and 
lived alike, we should have nothing to say to 
each other. If men wished nothing, worked for 
nothing, could possess nothing save that average 

1 101 ] 



VALUE OF PROPERTY 

of goods allowed by the dreamer as enough for 
felicity, — what would become of the arts, crafts 
and industries of the world; of its civilization 
and progress? Property affords a material basis 
for domestic happiness; it cannot guarantee such 
happiness. It also affords a motive for industry, 
helpful machines and means of transportation; 
but it cannot guarantee that all men shall be- 
come skillful and zealous and wise in the pro- 
duction of or use to which property may be put. 
Its tendency is to help, not to hurt; to help the 
poor as well as the rich. That it cannot cure the 
infirmities of men should not be urged against it. 
What crimes have been committed in the name 
of religion! Is it therefore bad? Men condemn 
property, but none should incline to do so who 
understand human nature and the spur which 
property affords to the languishing virtues of 
mankind. It is a selfish institution, but so is 
marriage and the home. Men will work for their 
own wives and their own children and their own 
property, and they will not work so zealously for 
any other. If it is wicked to be so, yet we are 
so and cannot help it. We must deal with 
human nature as we find it, and while we are 
human, 

"It will never be a natural thing for men to 
take extravagant pains for the mere sake of 

[ 102 ] 



SELFISHNESS 

doing good to others. Where a man can hon- 
estly propose nothing to himself except trouble, 
change and loss, to be violent in the pursuit of 
so ill a bargain is not at all suited to the lan- 
guishing virtue of mankind so corrupted. Such 
self-denying zeal in such a self-seeking age is so 
little to be imagined that it may without injury 
be suspected." 

The irony of Lord Halifax will offend many 
good people. To these I venture to say: is it 
not possible that such resentment may be un- 
reasonable? Selfishness is natural in the sense 
that none are without it. Is it not a certain 
sort of hypocrisy to ignore human nature and 
pretend that it is otherwise than it seems? Are 
not the church, the state and all other conven- 
tional institutions predicated upon the infirmi- 
ties of men? Do men not need salvation because 

they deserve condemnation? Are not laws and 
courts necessary because men are prone to 
crime and wrong-doing? Political economy pred- 
icates its doctrine on the same foundation. Why 
then should people who approve the church and 
state denounce political economy? Its doctrine 
is not wicked, neither is it unjust nor unfair, nor 
in any way injurious to the commonwealth. 
It found men disposed to be free and useful to 
themselves. Finding them so, it observed and 

I 103 ] 



CONCLUSION 

examined the consequences of these propensities 
and discovered in such propensities compensa- 
tions which are most reassuring. It justifies pri- 
vate property because private property affords 
to selfish, free men a motive to mutual service, a 
sure basis for general prosperity, an aid as well 
as an inducement to industry. Its doctrine is 
not an apology for selfishness, however clearly it 
may demonstrate that guided by paramount 
influences selfishness has been made useful to 
the community. 

To denounce human nature may seem very- 
great folly, yet to denounce selfishness will ever 
seem most generous. Is it therefore that men so 
loudly complain of political economy and profess 
to hate that property which affords the firm 
basis of its doctrines? Selfishness is ineradicable. 
Property is its effect, not its cause. If, like the 
church and state, philanthropy will calmnly allow 
what it cannot deny, much of the foolish decla- 
mation which now afflicts us will be quieted. 
Selfishness of itself may be either good or bad 
as its consequences are so. A courage which is 
admirable in a good fight may actuate the foot- 
pad. A selfishness which affords a powerful and 
constant motive to honorable industry, which 
induces a cordial and helpful cooperation and 
tends to a cheerful and intelligent mutual service 
should not be lightly condemned. 

[ 104 1 



CONCLUSION 

Property itself can be neither good nor bad. 
It is a possession, a tool, a thing. One may 
make a good or a bad use of it. Would any 
man take a good tool from a good man because 
in the hands of a bad man it may be used mis- 
chievously? The church is not the cause of 
hypocrisy, yet hypocrites thrive within it. Should 
churches therefore be condemned? 

I have attempted to justify private property 
not as an end but as a means to an end which 
none can affirm to be dishonorable. That end is 
comfortable living under conditions which admit 
of what we call the higher civilization. I have 
not attempted to justify its abuse. I know that 
all men have not achieved that end, but if so 
it is because some cannot or will not, by reason 
of their infirmities of character. If many fail 
where few succeed, the trouble lies not in the 
success of the few but in the failure of the 
many. The few do not succeed because the 
many fail, nor do the many fail because the few 
succeed. If we destroy property, we will not 
help the many. Their prosperity depends upon 
the guidance of those who are superior to them 
in those faculties of which every community has 
greatest need. If all must suffer, then great 
will be the disaster, for nothing is more true 
than that a common property involves a com- 
mon misery and a common slavery. 

I 105 ] 



CONCLUSION 

I trust the reader will pardon the reiterations 
of this brief essay. Prejudice is not easily 
overthrown, and I have thought that what one 
blow may not accomplish, two may. The same 
argument may have various aspects, one plausi- 
ble to this man, another convincing to that. It 
can do no harm to say twice or three times the 
same thing, save to those who do not need to 
be convinced. I do not write for them, but for 
those less familiar with the refined considerations 
upon which economic doctrine depends; and I 
have tried to make common errors evident to 
those who are obsessed by them. 



I 106 ] 



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